The Middle Kingdom will see middling returns well into 2025, according to new data on China’s economy and a bank analyst report released Monday, which paints a grim future for its consumer sector.

‘Weaker for Longer‘

An increase in food costs due to inclement weather disruptions was the primary cause of a 0.6% increase in China’s consumer price index last month, up a smidge from 0.5% in July, according to data released by the National Bureau of Statistics on Monday.

That was a tenth of a percentage point short of forecasts, and if you strip out volatile food prices — which rose 2.8% year-over-year, unchanged from July — non-food inflation was a mere 0.2%, down from 0.7% in July. The latter figure highlights just how much China’s persistent housing downturn, chronic joblessness, and rising debt have dragged on the world’s second-largest economy, once an engine of growth. Bloomberg Economics predicts that a measure of prices across the economy that has dropped for five straight quarters — the so-called gross domestic product deflator — will continue to fall into 2025, making for the longest run of deflation in China since data tracking began in 1993. At the same time, Barclays analysts dropped a report Monday following a two-week trip to the country, and their verdict had an immediate warning for foreign companies:

• The bank’s analysts said China’s economy looks like it will be “weaker for longer” after they returned from a visit to malls, retailers, investors, and experts. “The sentiment on the ground was much more cautious than 6 months ago, as there is now a clear view that the Chinese weakness is structural,” Barclays analysts wrote in a report.
• Barclays downgraded Adidas, Burberry, and Gucci owner Kering as a result of the trip, noting they expect luxury goods sales to rise 4% in 2025, compared to an earlier estimate of 7%. The bank flagged the pop of China’s finance and property bubbles and the end of high GDP growth as reasons to be more cautious of consumer spending there.

The D Word: Chinese officials have pressured economists not to say “deflation,” but prominent policymakers have begun to break ranks with the senior command — a sign of how serious they find the situation. “I think right now they should focus on fighting the deflationary pressure,” Yi Gang, the former head of the People’s Bank of China, told a conference in Shanghai on Friday. “At this point, proactive fiscal policy and accommodative monetary policy are important.”

Gamers have nothing on investors when it comes to fast twitch muscles. 

Shares in major video game publisher Ubisoft took an over 7% hit on Monday after an investor with a less than 1% stake in the company published a letter suggesting it should go private and shake up its management. The fact that such a minnow of an investor could significantly dent the share price shows how on edge the sector is lately.

Still In the Game

Ubisoft is known for popular franchises including “Assassin’s Creed” and “Far Cry,” and recently released a big, blockbuster “Star Wars” game. But, as reported by The Wall Street Journal, its recent work has been plagued by delays and cancellations, and its share price is down 41% year-to-date. Although the games industry is suffering a crunch overall, Ubisoft’s share price is faring worse than most.

But shares jolting downward isn’t the only symptom of the gaming sector’s hair-trigger pessimism: 

• Last week, Sony (which owns PlayStation) shut down a game called “Concord” just two weeks after it was released. “Concord” was a live-service game, meaning its business model was based more on an attention economy and keeping players engaged in the game, rather than just selling copies.
• PlayStation spent eight years developing “Concord,” but negative reviews from gamers and poor sales prompted it to shut down the game. It shows the risk that game companies take trying to bank on an attention-economy effort.

“In the end, live services are a high-risk, high-reward venture,” Rhys Elliott, a gaming analyst at MIDiA, told The Daily Upside. Despite this, Elliott expects Sony to keep plugging away at live-service games. “It only takes one big live-service win to generate billions in revenue and unlock new audiences — two things PlayStation wants as the console business faces growth challenges.”

Big in Japan: In another bizarre move, Sony raised the price of its PlayStation 5 console in Japan by 19% at the beginning of this month. The PS5 is now a 4-year-old console, so bumping the price up is pretty unreal. Sony said the increase was due to “fluctuations” in the global economy. Why those fluctuations only hit its home country of Japan is a mystery.

There were just four delicious seasons of HBO’s “Succession,” but the real-life succession battle that inspired it has lasted decades. 

On Monday, the Murdoch family was once again asked the $15 billion question: Who will take over the company after patriarch Rupert, 93, is no longer around? Now, activist investor Starboard Value is raising concerns about News Corp’s dual-class share structure, which it says could turn family squabbles into existential risks for the firm.

WayStarboard ValCo

It’s been roughly one year since ol’ Rupert announced he’d be leaving his dual chairman positions at twin family firms News Corp and Fox Corp, naming eldest son and ideological disciple Lachlan as his replacement. Evidently, not everyone bought into the succession plan. That’s because the Murdochs in sum only control about 14% of News Corp’s total equity, but, due to a dual-class share structure, Rupert and his brood (via a family trust) control around 41% of total voting power.

Starboard — which owns around 4.6% of Class B voting shares and this June increased its Class A stake from 1.9% to 3.7% — finds the hierarchy a little problematic. On Monday, it introduced a non-binding proposal to be voted on at the next shareholder meeting that would put the kibosh on the dual-class structure, stripping power from the founding family. A fresh Murdoch intra-family legal squabble makes it all the more pressing:

• While Lachlan has taken over his dad’s post, his job isn’t exactly secure in a post-Rupert world. As currently constructed, the family trust upon Rupert’s death would split voting power between four ideologically-diverse Murdoch children — Lachlan, James, Prudence, and Elisabeth — but Rupert has recently moved to consolidate power in Lachlan’s hands, triggering a lawsuit from his other offspring, The New York Times reported in July.
• “The four Murdoch siblings with voting rights within the Trust are reported to have widely differing worldviews, which, collectively, could be paralyzing to the strategic direction of the Company,” Starboard wrote in a letter to shareholders, adding, “More importantly, we are not sure why their perspectives should carry greater weight than the views of other shareholders.”

All in the Family: The Murdochs could still ask the SEC to exclude Starboard’s proposal from the agenda of this fall’s shareholder meeting. In the past, they’ve simply soldiered through similar votes, including a 2015 effort that saw just under half of News Corp shareholders supporting a bid to end the dual-class structure. Cue those piano keys.