2Q24 Investor Letter
“In the first half of this year, restaurants faced a Wet-rice symptom. The discounted price of KFC’s most celebrated fried chicken was reduced to half. QSRs could normally have stable pricing despite weaker demand. We believe there’s an external factor to explain the pricing - and what we found was similar to the Wet-rice symptom - instead of human capital redundancy, this time, it was household savings redundancy.
Since COVID, Chinese households have accumulated an additional USD 9 trillion in savings, amounting to 1.5 times the country's annual consumption expenditures. Pre-pandemic, household savings as a percentage of GDP stood at around 80%, the highest among major economies. By the end of 2023, this percentage increased to 109%, and by mid-2024, it further escalated to 114%. While people often refer to high saving rates in China as a consumption problem, it is also an investment problem. ”