CNBC's The China Connection newsletter: Losing the Chinese shopper could soon have global consequences

While Nvidia's marketplace stock has gone to zero successful China owed to U.S. restrictions, Apple is seeing section iPhone request prime up.

It's nary tiny feat for Apple. On apical of escalating U.S.-China commercialized tensions and sluggish user spending, the smartphone institution faces an onslaught of Chinese competitors besides warring for marketplace stock abroad.

But the iPhone maker, similar truthful galore of its Western peers, isn't astir to springiness up connected China, particularly arsenic the world's biggest buying event — Singles Day — gets underway.

In conscionable a fewer months, Apple has revamped its section strategy. The institution successful August yet opened an relationship connected the societal media app Xiaohongshu, oregon RedNote, which has go the hep spot for sleek user contented successful China.

And arsenic livestreaming has go a staple successful Chinese e-commerce, CEO Tim Cook reportedly joined a league connected ByteDance's Douyin, the Chinese mentation of TikTok, past week to denote that the iPhone Air would yet motorboat successful mainland China aft an archetypal delay. Cook besides met with Labubu creator Kasing Lung while visiting Shanghai.

Combined with merchandise improvements, the selling paid off.

As Singles Day kicked disconnected connected Monday night, iPhone income successful the archetypal 2 hours connected Alibaba's Tmall level exceeded the total from the archetypal time of past year's event.

Earlier connected Monday, investigation steadfast Counterpoint Research said first-10-day portion income of the caller iPhone 17 bid successful China had astir doubled those of its predecessor.

Strong iPhone 17 income successful the U.S., Apple's largest market, helped too. Apple shares deed a grounds precocious Monday, reinforcing its presumption arsenic the world's second-most invaluable nationalist institution aft Nvidia.

Greater China, which includes Hong Kong and Taiwan, remains Apple's third-largest market, contributing astir 16% of income successful the 3 months ended June 28.

China is conscionable arsenic important for Nike, driving astir 13% of the sports brand's income successful the 4th ended Aug. 31. For Lululemon, mainland China is its second-biggest marketplace extracurricular the Americas with 16% of full nett revenue arsenic of this summertime — up from 13% past year.

The companies each saw beardown results arsenic Singles Day kicked off. In the archetypal hour, Apple, Lululemon and Nike were among the 80 brands selling connected Tmall that saw income transcend 100 cardinal yuan ($14.05 million), Alibaba said. The Singles Day promotional lawsuit ends astir Nov. 11.

Other U.S. brands, from quality to nutrition, besides privation successful connected the Chinese user market. Late past week, 50 representatives from U.S. user brands gathered in Los Angeles for the archetypal associated lawsuit hosted by Tmall Global successful North America and WPIC Marketing + Technologies.

Cross-border e-commerce is "the astir effectual way to participate the Chinese marketplace successful astir merchandise categories, particularly amid commercialized tensions," said Jacob Cooke, co-founder and CEO of WPIC. "We besides emphasized that Chinese user request for high-quality U.S. products remains resilient contempt those tensions."

The lawsuit coincided with Alibaba's ain Singles Day motorboat successful Shanghai, wherever the institution showed disconnected caller AI tools to entice shoppers much efficaciously and trim costs for sellers.

Alibaba claimed that 1 specified diagnostic tin observe whether a idiosyncratic is buying for a acquisition oregon a idiosyncratic item, and tin physique a acold much analyzable shopper illustration that improves merchandise targeting by 25%. Another allows shoppers to hunt with vague presumption specified arsenic "best feline litter enactment for a location with some cats and dogs" and find a suitable product.

The caller AI tools "are casual to enactment with," Cooke said. "We expect this large-scale AI integration to present a measurable boost to Singles' Day performance."

These tools are besides a trial for Alibaba's AI ambitions. The institution has spent billions to make its ain versions of ChatGPT and video procreation models, integrating them into existing concern lines.

Alibaba Vice President Zhang Kaifu, who oversees AI for e-commerce, told reporters past week the institution has already made backmost its AI investment successful the online buying business.

The institution is acold from being the lone 1 utilizing AI for retail. Smartphone institution Honor past week besides released an on-device AI instrumentality that tin quickly comparison prices — including coupons — crossed online buying sites successful China.

AI-driven retail isn't caller successful China, said Charlie Dai, VP and main expert astatine Forrester. He pointed retired that Chinese retailers and manufacturers person been utilizing AI tools for the past decennary to forecast request and negociate proviso chains, reducing inventory waste.

"[This year,] we tin besides expect virtual try-on, AI unrecorded hosts, conversational assistants connected eCommerce and societal platforms similar JD.com and Douyin to boost engagement, trim returns, and chopped influencer costs," helium said.

Those outgo savings are coming astatine a captious clip for brands. China's retail income grew by conscionable 3% successful September from a twelvemonth ago, good beneath levels seen earlier the pandemic.

That didn't halt LVMH from opening "The Louis" this summer, a flagship store housed successful a ship-shaped gathering conscionable crossed from 1 of the world's largest Starbucks Reserve locations successful downtown Shanghai.

More than 100,000 radical walk by The Louis each day, and astir 2,500 sojourn it daily, according to HSBC analysts. "In a marketplace that needs immoderate joy, an constituent of surprise, existent reasons to reconnect with brands fixed the morose backdrop, the inaugural is intelligibly hitting a nervus adjacent 4 months aft the opening," they wrote successful a enactment Monday.

One of The Louis' visitors past month was LVMH CEO Bernard Arnault, who reportedly besides checked retired upstart Chinese luxury marque Laopu Gold. The European luxury elephantine past week reported an betterment successful Chinese user spending domestically, up by the mid-to-high azygous digits, with Asia remaining its biggest marketplace by revenue, up of the U.S.

For some of the richest radical successful the world, U.S.-China tensions won't halt them from trying to bash concern with Chinese consumers.

As Weiwan Han, spouse astatine consultancy Bain & Company, summed it up to me: precise fewer brands are leaving China, if lone to support their planetary marketplace share.

"If you suffer here, yet you suffer everywhere, due to the fact that your section contention is going overseas, your e-commerce platforms are going overseas."

LVMH would lone corroborate that Arnault visited The Louis successful Shanghai. Apple did not respond to a petition for comment.

China swaps retired WTO negotiator. Beijing announced Tuesday that Li Chenggang, a vice commerce curate who has been portion of the negotiating squad connected U.S. trade, would no longer hold his different relation of typical to the World Trade Organization.

Real property drags down growth. China reported GDP maturation of 4.8% successful the 3rd quarter, but fixed-asset concern for the archetypal 9 months of the twelvemonth unexpectedly contracted arsenic the diminution successful spot concern steepened.

China replaces U.S. soybeans. For the archetypal clip since 2018, China imported zero soybeans from the U.S., alternatively turning to South America for the crop, according to information for September.

Chinese markets fell Wednesday, tracking losses crossed astir of Asia.

The Hang Seng Index dropped 1.27%, portion the CSI 300 declined 0.7%. Both indexes person added 28.1% and 16.29% respectively this year.

Yields connected China's 10-year authorities bonds were dependable astatine 1.768%.

The show of the Shanghai Composite implicit the past year.

Oct. 23: China's apical leaders wrapper up the "Fourth Plenum" to sermon five-year goals

Oct. 23-25: Chinese deliberation vessel CF40 hosts its Bund Summit successful Shanghai

Oct. 25: U.S. Treasury Secretary Scott Bessent expected to conscionable Chinese Vice Premier He Lifeng successful Malaysia; Shenzhen-based GoPro rival Insta360 to unfastened its first Hong Kong flagship store

Oct. 27: China reports concern profits for September

Oct. 27-30: China holds state-organized Financial Street Forum successful Beijing

Oct. 29: APEC CEO Summit begins successful South Korea up of economical leaders' meeting; Hong Kong banal speech closed for a section holiday