Most Chinese retailers struggled for growth in 1H21, and we believe such trends will be extrapolated into 2H21. The intense competition also led to rising promotion budgets, which we believe were a ‘double whammy’ (slower revenue growth resulted in operating deleverage, and increased selling expenses) to retailers’ profitability. We maintain our cautious view on most retailers, except for CTG where we are positive, because: 1) its price advantage persists, particularly in the cosmetics and beauty space, 2) extended cross-border controls will keep most Chinese consumers’ travel domestic rather than abroad, and 3) increased luxury exposure would lead to ASP and margin upside. We reiterate CTG (OW) as our top pick in the China retail space, and believe there will be further potential upside in 2022 when its online capacity, logistics and platform ramp up. We remain cautious on Gome and Suning.