People need to calm down. Economies take time to get back on track. It's not like China is the only country in the world suffering from consumption downturn. You cannot draw conclusions both positive and negative from monthly data. Wait, till the year end...
Chinese Economics Thread
- Thread starter Norfolk
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I didn't conclude anything. I just provided a reason why China doesn't really care about retail growth being low. There's no reason why China should save dying industries like ICE cars to boost GDP.
No, it is not a bad idea. First, the figures are around 80% of households with who owns their own home. In rural areas, it is practically 100%. But the demand is not there but the urban areas.
Home ownership is much lower in urban areas when including the migrant (out of town) population and especially for young people attempting to make a start in life. Multiple home ownership is much more prevalent in cities and provincial centers where wealthier households own properties as investments not as potential housing stock which again impacts young people.
This plan redirects homes from pure investment to actual housing pool. In the long term, it can be a better deal for society. As every Chinese know, getting married and having kids is constrained by housing and education costs. This would alleviate at least the former and help with demographics in the long term.
Let's see, a massive unwinding of a property bubble burst (deliberately popped by the government) that clobbered home prices and you still have a growth of 2.3% -- with direct human spending like entertainment and tourism way up. Unless you expect the moon every month, this is not disappointing in any sense of the word to be perfectly honest.
As for autos, China had sales of 25M last year and a big increase of 10% in the 1st quarter of this year.
To be perfectly honest, with a major RE bubble burst we should be seeing much worse numbers. The crash in property prices in a country should have resulted a decline of spending not a 2.3% growth in retail that somehow got twisted into a "disappointment."
I don't think real estate crash would have that big impact for retail sales prices. Remember last year also prices were falling it's not this year only "crash". People who would buy a lot of retail appliances to finish their houses and live in them are still buying, people who were buying properties for investment, rarely even finish them, they have just been wait for a good moment for sale and earn bucks(RMB).
However I can agree that people who had their wealth connected to real estate may have stopped or slowed their spending cause their 'artificial' wealth decreased in their eyes.
If you want your economy to grow 5% every year, than retail sales should follow and grow also 5% every year, nothing special about it. If you are happy about 2% growth then 2% growth should satisfy you.
Another thing is what the base is. Last year, China had strong march & April, but then weaker May and weak June. So if May and June retail sales continue to show similar level of weak growth, we have a real problem. Until then, I think we should make use of pmi numbers for early indicators
Exactly, we need to wait till the end of the year to properly access Chinese economy and it's future.
This is what happens when you go all in on consumption as economic policy over time (over-consume above your true productive capacity, you must go into high HH debt to finance that, and you get inflation as more and more money chases the same amount of goods).
And, at the end of the day, I bet that Chinese people feel way more comfortable and financially secure avoiding those pitfalls, and maybe this is why satisfaction and optimism-related polls are so good there. Also way less potential for financial contagion that way as well.
So, these data shouldn't signal anything "bad" and shouldn't signal "weakness", it is just an individual, deliberate, smart, responsible spending culture that is very stress-free. Production capacity and real wage increases are what matters in the end, not high consumerism.
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fyi, many of us actually live in America. While things in America isn't rosy, it does not matter to people in China. China does not need to compare itself to how America is doing. Let's stay on the topic of Chinese economics
First of all, a RE crash always have huge impact on retail because creates a drop in tge largest component of household wealth. Look up the 2008 subprime crisis in the US. American retail sales in 2009 was knocked back to 1980s levels.
China is going through a similar unwinding of a RE bubble but things are handled much better with growth in retail still happening. And also amidst a restructuring of investment from RE to manufacturing which creates a dislocation effect for many households (jobs lost in construction, RE agencies, etc.)
Secondly, it was just one month -- April, first quarter growth in retail sales was 4.7%.
Third, the drop in retail sales came from autos which had enjoyed big growth in 2023 and is going through a price war.