by winston » Fri Sep 12, 2008 4:24 pm
China Retail-Sales Growth Close to Fastest Since 1999 (Update2)
By Nipa Piboontanasawat
Sept. 12 (Bloomberg) -- China's retail sales grew at close to the fastest pace in at least nine years as rising incomes encouraged consumer spending.
Retail sales rose 23.2 percent in August from a year earlier to 876.8 billion yuan ($128 billion), the National Bureau of Statistics said today, after gaining 23.3 percent in July. That was more than the 23 percent median estimate of 25 economists surveyed by Bloomberg News.
Domestic consumption may help to buffer the world's fastest-growing major economy as an export slowdown saps demand overseas demand. Coca-Cola Co., which agreed this month to buy China Huiyuan Juice Group Ltd. for $2.3 billion, is among foreign companies seeking a bigger share of spending fueled by rising incomes.
``Stable domestic demand will provide a cushion against the slowdown in exports,'' said Qu Hongbin, chief China economist at HSBC Holdings Plc in Hong Kong.
The yuan traded at 6.8453 versus the dollar as of 1:44 p.m. in Shanghai, compared with 6.8465 yesterday, according to the China Foreign Exchange Trade System.
Garment sales jumped 29.5 percent in August from a year earlier and spending on meat, poultry and eggs surged 26.7 percent. Jewelry sales soared 44.3 percent.
Olympic Games
Gome Electrical Appliances Holdings Ltd., China's No. 2 electronics retailer by market value, reported first-half profit almost tripled after it opened new stores.
Some economists had expected retail-sales growth to be restrained last month by what Wang Qian, of JPMorgan Chase & Co. in Hong Kong, called the ``stay-at-home effect'' of Chinese people watching the Olympic Games on television instead of shopping.
Song Yu and Liang Hong, economists at Goldman Sachs Group Inc. in Hong Kong, said the strength of sales growth was ``puzzling.'' The Olympics may have contributed, along with rising prices for non-food products, they said. Overall, inflation was 4.9 percent, down from 6.3 percent in July, as food-price gains eased.
Beijing attracted fewer overseas visitors last month compared with a year ago, even with the Olympics taking place, after the government tightened visa rules.
Foreign visitors who spent at least a night in the Chinese capital fell 7.2 percent to 389,000 in August, the Beijing Tourism Administration said. Domestic travelers who stayed at the city's star-rated hotels fell 42 percent to 708,000, it said.
Wages Growth
Urban household disposable incomes climbed 14.4 percent to 8,065 yuan for the first six months of 2008 from a year earlier, while rural earnings rose 19.8 percent to 2,528 yuan. Adjusted for inflation, they gained 6.3 percent and 10.3 percent respectively.
China's economy expanded 10.1 percent in the second quarter, slowing for the fourth straight quarter. The government is guarding against a slump after overseas sales rose only 22.4 percent in the first eight months, down from 27.8 percent a year earlier.
Stronger consumption may help policy makers to rebalance the economy away from relying on investment and exports.
``The level of Chinese consumption is still low relative to the size of the economy,'' Mark Williams, an economist at Capital Economics Ltd. in London, said in a note last month.
Government Spending
Consumption, including government spending, had a 50 percent share of gross domestic product in 2006, compared with 71 percent in the U.S. and 65 percent in India, he said.
``But the proportion has finally stopped falling in China, suggesting that the rebalancing away from investment toward consumption, long-sought by the government, might not be too far round the corner,'' Williams said.
Slumping stocks and weakness in the property market are threats to consumer sentiment and spending.
The key CSI 300 Index of shares dropped 61 percent this year.
China's property market could be headed for a ``meltdown'' as home prices and sales decline, Morgan Stanley said today.
For the first eight months, retail sales climbed 21.9 percent from a year earlier to 6.8 trillion yuan, the statistics bureau said. That was up from the 16.8 percent pace for all of 2007.
Bloomberg's retail sales data for China began in 1999.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"