Strong retail sales growth, weak growth in industrial production
The stock market had another marginally weak day, losing 0.3%, after dropping 0.4% yesterday, to close at 2438. There was no obvious reason for the decline and little volume in the market.On the one hand the statistical bureau released figures showing that industrial production rose by 14.7% year on year in July, below June’s 16.0%, which also happened to be the median estimate by most economists. This suggests the possibility of a future export-related slowdown, but is as likely to have been caused by Olympic-related pollution-measures, like closing of factories in the Beijing area.
On the other hand yesterday the statistics bureau released figures showing that retail sales grew at the fastest pace in nearly a decade. According to an article in yesterday’s Bloomberg:
China's retail sales expanded at the fastest pace in at least nine years in July as incomes and prices climbed in the world's fastest-growing major economy. Sales rose 23.3 percent to 862.9 billion yuan ($126 billion) after gaining 23 percent in June, the statistics bureau said today. That was more than the 22.4 percent median estimate of 19 economists surveyed by Bloomberg News.
This is good news because China very clearly needs to rebalance its economy away from its over-reliance on exports and investment, although it is unclear how much of this growth may be caused by Olympics fever.I entered the apartment building yesterday of one my friends, and on the ground floor under the stairs there were two sets of boxes that had obviously been part of the packaging of two very large television/entertainment units. My friend laughed when he saw the boxes and said that obviously his neighbors had bought new TV sets to watch the Olympics, and he told me that his parents had recently done the same. I guess this is happening quite a lot, and may affect the consumption numbers – at any rate TCL, China’s biggest consumer electronics company, said on Tuesday that it sold nearly 5.4 times as many liquid-crystal display TV sets in July than it sold in July 2007.
On that note I have been asked several times recently if I think there will be a post-Olympic slowdown – for example today two friends of mine who work in one of the government think tanks wanted to discuss this over coffee.They seemed concerned about the possibility.
I am not smart enough to say. Given the feverish excitement about the Olympics, the rise in Olympic-related consumer-goods sales, and the number of people who have traveled to Beijing either to watch the games or to act as volunteers, I would imagine that there has been a temporary spike in spending that will be reversed in the next few months – or will at least act as a drag on future spending.
I don’t know how serious this reduction in spending will be, however.I think that at least part of the answer is psychological. China has been on a massive high recently, and I expect it to continue (China is doing very well in the Olympics and is clearly in the lead in capturing gold medals). After the Olympic Games are over and the rush of excitement gone, it will be interesting to see what the mood of the country is. In the major cities, I suppose, at least part of the answer may depend on real estate and stock market prices.
Michael Pettis is a professor at Peking University's Guanghua School of Management, where he specializes in Chinese financial markets. He has also taught, from 2002 to 2004, at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the board of directors of ABC-CA Fund Management Co., a Sino-French joint venture based in Shanghai.
Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the Sovereign Debt trading team at Manufacturers Hanover (now JP Morgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was Managing Director-Principal heading the Latin American Capital Markets and the Liability Management groups. He has also worked as a partner in a merchant banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team. Besides trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
Pettis is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. He is the author of several books, including The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (Oxford University Press, 2001). He received an MBA in Finance in 1984 and an MIA in Development Economics in 1981, both from Columbia University.
Subscribe to this Site
in yesterday’s Bloomberg:
Comments for "Strong retail sales growth, ...
January, 2008