China’s slowing consumption growth6 February, 2012, 12:01. Posted by Zarathustra
Tags: Consumption, Economy
In the recent years, I have been a sceptic on the China consumption story as a part of investment strategy (fair enough, if you have been holding such view for 3 years or more, you have been wrong for quite a while before you finally looked as if you were right). Not that I don’t believe that the Chinese economy will be rebalanced towards a more consumption driven one, but the view here is probably far less rosy than the bulls would like to think of with respect to rebalancing.
Late last year, I have flagged that small signs of consumption growth slowing were seen in Hong Kong’s jewellery shops (whose owners I knew) as well as in Shanghai. As if these are not enough, the sales growth for this year’s Chinese new Year has been slowing for luxury sector (again, like jewellery) in Hong Kong, reflecting the slowing sales to the Mainland Chinese visitors.
Chinese shoppers on their Lunar New Year holiday were less lavish than expected at Hong Kong jewelers, curbed spending on beauty brands and slowed spending at South Korean stores. They may keep that pace in the coming year of the dragon.
Holiday sales on the mainland grew 16 percent to 470 billion yuan ($75 billion), according to data from the Ministry of Commerce, the slowest pace since the 2009 financial crisis and three percentage points below last year’s increase. China is finding it is not immune to global economic forces and the slowdown is hitting Chinese consumers, who may increase this year’s spending at a slower pace than in 2011.
Not surprisingly, as the economy is slowing, and as the real estate bubble is bursting, people would naturally few less happy to spend. As I said that things could deteriorate
given the slowdown in the property sector (of which the second-order impact is not well understood at the moment) and the big macro risks of the Euro crisis which can blow the world economy up.