Retail sales boost for Chinese economy

China’s economy showed signs of rebalancing in October after recording the fastest rise in household spending since the start of the year and stable rates of industrial production.
The world’s second largest economy recorded a 4.8 per cent jump in retail sales last month, the best performance since February and beating economists’ expectations, as shoppers were buoyed by discounted events such as China’s Golden Week and Singles’ Day, with Black Friday still ahead.
Separate figures from last month showed industrial production was steady at 5.3 per cent, matching September’s growth rate, while measures of investment in the public and private sector stabilised at 3.4 per cent.
October’s retail sales suggest the economy is undergoing a steady rebalancing from its export-driven model to greater domestic consumption.
Analysts at Goldman Sachs said the economy was benefiting from a “gradual improvement in growth momentum” that should help the country achieve its annual growth target of “around 5 per cent of GDP” set by the Communist Party.
The figures will give comfort to Beijing’s policymakers, who have unleashed a multitrillion-dollar stimulus into the economy in the last two months to revive faltering growth and encourage greater consumer spending.
Retail sales rose on the back of higher car sales, after the Communist Party introduced a trade-in scheme for older vehicles, and subsidies for domestic appliances.
Sales of home appliances grew by 39 per cent in October compared with the same month last year.
Economists think the easing policies, which also include lowering interest rates and increasing central bank liquidity to the financial system, are not yet enough to spark households into spending more than they save.
China’s growth model — which has shifted in the last decade from the production and export of low-value goods to more sophisticated technologies like clean tech and electric vehicles — is under threat from Donald Trump’s promise to levy a 60 per cent tariff on all Chinese imports to the US.
Chinese equities listed onshore and offshore both fell by more than 1 per cent on Friday over fears of a trade war. Shivaan Tandon, markets economist at Capital Economics, said investors were not yet convinced that China’s fiscal measures would lead to a “sustainable structural turnaround in China’s economy”.
Tandon said Trump’s threatened tariffs would be a “sizeable” blow for Chinese equities. “While Chinese and US equities delivered similar returns overall during Trump’s first term, China’s stock market fared particularly poorly in 2018 when a trade war started,” he said.
“What’s more, Trump’s proposed tariffs are more stringent this time, so the threat to China’s stock market is arguably even greater.”