China Macroeconomics & Academia

Christopher Balding

Thematic (Sector/Industry)

China Consumer discretionary / Thematic (Sector/Industry)

<ol><li>Given the available data, we believe it indicates that Chinese consumer growth remains positive but significantly weaker than headline official numbers indicate.</li><li>Large retailers appear to be suffering near zero growth across a variety of products.</li><li>Online retailing is still growing rapidly but its rate of growth is slowing and remains responsible for only 10.6% of spending.</li><li>Due to the weakness in large retailers and strong but small market share of online retailers, this leaves only small and medium size retailers as driving official retail sales numbers. We find this a dubious conclusion.</li><li>The combined retail sales and physical output of consumer product data implies that retail and consumer spending is growing much closer to the 3-6% range than the official 11% retail sales growth.</li><li>Related services like transport and hotel is showing significant weakness that is more reflective of an overall weak retail and services sector.</li></ol>

Given the available data, we believe it indicates that Chinese consumer growth remains positive but significantly weaker than headline official numbers indicate.Large retailers appear to be suffering near zero growth across a variety of products.Online retailing is still growing rapidly but its rate of growth is slowing and remains responsible for only 10.6% of spending.Due to the weakness in large retailers and strong but small market share of online retailers, this leaves only small and medium size retailers as driving official retail sales numbers. We find this a dubious conclusion.The combined retail sales and physical output of consumer product data implies that retail and consumer spending is growing much closer to the 3-6% range than the official 11% retail sales growth.Related services like transport and hotel is showing significant weakness that is more reflective of an overall weak retail and services sector.

Nanjing Xinjiekou Department S (600682 CH)

Beijing Yanjing Brewery Co, Ltd. (000729 CH)

Inner Mongolia Yili Industrial Group (A) (600887 CH)

Beijing Dabeinong Technology Grp (002385 CH)

China Shipbuilding Industry Group Power (600482 CH)

Shenzhen Agricultural Products Co, Ltd. (000061 CH)

Chinese Universe Publishing&Media (600373 CH)

Meinian Onehealth Healthcare H (002044 CH)

China Tourism Group Duty Free Corp Ltd (601888 CH)

Chongqing Changan Automobile Company (200625 CH)

Shenzhen Overseas Chinese (A) (000069 CH)

Beijing Gehua Catv Network Co, Ltd. (600037 CH)

Foshan Haitian Flavouring & Food (603288 CH)

Songcheng Performance Development (300144 CH)

Anhui Zhongding Sealing Parts Co, Ltd. (000887 CH)

Belle International Holdings (2129452D HK)

Sichuan Changhong Electric Co, Ltd. (600839 CH)

Henan Shuanghui Investment & Development (000895 CH)

Wens Foodstuff Group Co., Ltd. (300498 CH)

Retail and Consumer Activity in China