China’s Retail Sales Increase by 22 Percent; Fastest Pace in 9 Years

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Nov. 12 – China’s statistics bureau says that retail sales for October increased by 22 percent, the fastest pace in nine years.

Retail sales for October reached RMB1 trillion. According to Bloomberg News, this figure matched the median estimate of 16 economists surveyed.

On Nov. 9, the government promised to implement a US$586 billion economic stimulus package to stimulate its slowing economy and build new railways, communities, subways and airports in the next two years.

China’s economy expanded by only 9 percent in the third quarter of this year, a break from its average double-digit growth in the last five years. The global credit crisis has already hit China’s export industry and dampened real-estate sales. In the manufacturing hub of Shenzhen, house prices dropped by 12.6 percent last month from a year earlier.

“The big package sent a signal for people to keep shopping,” said Arthur Kroeber, head of research at Dragonomics Advisory Services Ltd. told Bloomberg. “Rising domestic consumption will help to cushion economic growth in the coming months.”

There is the expectation that wage gains in the country may lead to more spending. In the first nine months of the year, urban disposable incomes increased by 7.5 percent, compared to last year’s figures and rural incomes climbed by 11 percent.

As we pointed out in the November issue China Briefing Magazine, the emerging countries of Asia are now to encouraging their citizens to be more like the West by buying instead of saving. In the United States, consumer spending accounts for almost 64 percent of its economy compared to China’s 35 percent in 2007.

Asian governments are now starting to implement policies to spur spending local spending. Take the example of Thailand’s central bank, it has so far left its benchmark interest rate unchanged since July while Vietnam has cut their benchmark interest rate in October.

2 thoughts on “China’s Retail Sales Increase by 22 Percent; Fastest Pace in 9 Years

    The big public spending program of the Chinese government will be pivotal for export countries like Germany where China takes a big proportion of the overall exports especially in fields like machinery and equipment. China itself needs according to experts’ estimations a minimum GDP growth of 7-8% p.a. in order to keep its social stability.

    Chris Devonshire-Ellis says:

    Thanks Dana. Yes, you’re correct. The Chinese generally view 9% as a figure they need to maintain. Anything below that starts ringing alarm bells as a slower rate increases unemployment, and that can trigger serious social unrest issues. 7% I think would start to become highly problematic. As published rates start to dip below 9% you start to see the Central Government introduce measures to maintain the GDP rate – which is exactly what has occured.

    – Chris

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