Tag Archives: what’s happening in China:

The Golden Week: Retail Thrives, Real Estate Dives – What’s Happening in China

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Sometimes you just get egg on your face. Last week as I read through the news feeds each morning on what’s happening in China, I gave a little bit of an overview, but I didn’t catch on to the fact that the internal China markets were closed the whole week, while the Hong Kong markets were open. When I reported on the Shanghai A and Be shares, it was the same closing quote for several days before I realized my gaff. Sometimes, I’m not totally with it. Easy to make the mistake as I don’t trade stocks in China- I trade in China companies with US listings, and there were plenty of those around.

Last week was what the Chinese call the “Golden Week”. Second only to Chinese New Year in importance, most Chinese take the entire week off. The more affluent travel and shop. Much like our Black Friday just after Thanksgiving, the Golden Week kicks off a shopping frenzy that lasts to about the end of November. Spending this week can be helpful in gauging the health of the Chinese economy.

Bloomberg reports China retail sales were extremely robust. Spending at shops and restaurants jumped 17%.5% over the previous year to $109 billion US.

Shopping during the Golden week is not relegated just to consumer goods. Real estate is also a major focus, and the news was good there as well. Real Estate sales remained slow, and prices continued to contract slightly.

Apartment sales in Beijing dropped 22.8% from a year ago, and crowds of home buyers were not out.

Food prices, while elevated, have remained stable, while energy prices have come down with recent price cuts in gasoline.

The world is pricing the China markets as if debt throughout the country will implode, exports will go in the toilet, and consumers will disappear. With real estate sales slowing, it would appear there could be some problems with debt. However, the 17.5% increase in retail sales suggest the ever growing number of Chinese consumer could step in to fill the gap for the slumping real estate market, and the very slight decrease in exports.

Experts who track the stats believe China’s CPI (measure of inflation) will continue to come in around 4.5% to 6%, and GDP growth will migrate to 8.5% to 9%.

I was a little surprised when I saw the Shanghai A shares down .6% and he B shares down .96% as the numbers out of the Golden Week suggest China could be headed for the soft landing investors on the long side are hoping for.

Those markets are now down 7 or the last 9 trading days, albeit with a week off in between.

Another China Snore Fest Today

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Checked all the news feeds out of China, and there’s not much to report of major interest. Seems like the world has shut down as the East Coast enjoys a Christmas like last long weekend of the summer.

Here’s what’s happening in China: 

  • There was almost no movement in the major China indexes today with the Shanghai A shares down .46%, and the B shares up .02%.
  •  BIDU has been on a tear of late, but lost about 6 points from yesterday’s high thanks to a report by something called the Bedford Group suggesting China internet firms are under attack from their own government, and censorship is wide spread. They also suggest the censorship might help those big boys by eliminating some of the small competition. The stock has been on a tear of late, but is down 6 points from yesterday’s high of $151.
  • China manufacturing rebounded slightly in August, put costs were higher as well. The HSBC purchasing manufacturers index rose to 49.9 from 49.3.  At the same time, new exports fell from 50.4 to 48.3. On these indexes, readings under 50 suggest contraction- over 50 is expansion. As a perfect reflection of the rest of the world, China export numbers suggest we are teetering at the brink of recession vs expansion. I suspect this will be the slowest period as the global news flow has to be slowing expansion appetites.
  • In a move I believe shows China’s commitment to help their rapidly expanding consumer class, the Chinese government has decided to eliminate income taxes for 60 million people. This will increase disposable income for the poorest people in the work force. This will also help mitigate some of the social unrest that is brewing thanks to rising food costs in China.
  • China Daily reports a new study suggests consumer lending in China could triple by 2015 to $3.3 trillion. This requires annual average growth of 24%. In terms of new financial products in China, mortgages are #1 and credit cards are #2. Currently, there are about 230 million credit cards in China- with young card holders averaging 2.6 cards per person.
  • That’s it for today. This will pick up next week as Wall Street’s big boys get back to work.