Xi Frugality Drive Damps China New Year Retail-Sales Growth
Retail sales in China during the week-long Lunar New Year festival rose at the slowest pace in four years as a crackdown on extravagant spending by officials and state-owned companies limited outlays on food and drink.
Sales at shops and restaurants monitored by the Ministry of Commerce increased 14.7 percent in the Feb. 9 to Feb. 15 period from the year-earlier break to 539 billion yuan ($86 billion), the ministry said. That was down from a 16.2 percent pace in 2012 and the least since a 13.8 percent gain in 2009, according to previously released figures.
The New Year holiday, comparable to the peak Christmas shopping rush in the U.S., is a period when consumers in the world’s second-biggest economy splurge on food, jewelry and gifts, and government officials are wined and dined. Sales may have been damped by a campaign started by Xi Jinping, the new head of the Communist Party, to rein in lavish spending while rising incomes prompt more Chinese to travel overseas.
“The slower growth, manifested in the restaurant business, was partly a result of the government crackdown on corruption and the anti-waste campaign,” Leon Zhao, a Shanghai-based analyst at researcher Frost & Sullivan, said in a telephone interview. “We expect overall retail sales and consumption to rise again along with the improving economy in the second and third quarters.”
A brighter economic outlook may help boost store receipts. China’s gross domestic product rose 7.9 percent in the final three months of 2012 from the same period a year earlier, halting a seven-quarter deceleration. Growth may recover to 8.1 percent in the first quarter, according the median estimate of 30 analysts surveyed by Bloomberg News last month.
The World Bank forecasts China’s expansion will quicken to 8.4 percent this year from 7.8 percent in 2012, more than four times the pace of the U.S. The euro area will shrink 0.1 percent, the lender projects.
China’s economy is poised to grow “reasonably fast” as incomes rise, Li Daokui, a former adviser to the People’s Bank of China, said in an interview with CNN aired yesterday, according to a transcript. With China’s per-capita income 18 percent of that in the U.S., Li said China will continue to expand quickly as its economy closes the gap with the rest of the world.
Speaking at a meeting of finance ministers and central bankers from Group of 20 nations in Moscow, PBOC Governor Zhou Xiaochuan said China’s policies to boost domestic demand and restructure the economy have borne fruit, Xinhua said in a Feb. 16 report.
Since taking over as party chief in November, Xi Jinping has pursued a campaign to curb waste. All government organs, institutions, state-owned enterprises and non-profit organizations as well as officials at various levels should set examples of putting an end to extravagance, a Jan. 28 Xinhua report cited him as saying.
Food sales in outlets monitored by the Ministry of Commerce rose 9.8 percent over the seven-day holiday compared with last year’s festival, according to a statement on its website on Feb. 15. That was down from a 16.2 percent pace in 2012. Spending at “high-end” restaurants in the eastern province of Zhejiang dropped by more than 20 percent, the ministry said.
Many hotels and restaurants reported a decline in business, according to a Feb. 16 Xinhua report. The five-star Liuzhou Hotel in the southern city of Liuzhou, frequently used for government receptions, saw consumption of abalone, lobster, Moutai liquor and imported wines drop “drastically,” it said, citing an employee who declined to be identified. Lu Qiang, the owner of a store in Shanghai that buys gifts from officials for resale, told Xinhua business was less than half of last year’s.
Shares in Shanghai-listed Kweichow Moutai Co. (600519), the maker of the white spirit, have dropped 19 percent since Xi took power on Nov. 15. Over the same period, the benchmark Shanghai Composite Index has jumped 20 percent. The gauge rose 0.1 percent as of 9:38 a.m. local time today in the first trading since Feb. 8, while Kweichow Moutai fell 2.3 percent.
Steeper discounts, longer promotion periods and Valentine’s Day falling during the 2013 festival were expected to help drive purchases, especially of gold and jewelry, Candy Huang, a Hong Kong-based analyst with Barclays Plc, said before the holiday. The New Year break was in January last year.
Commerce ministry data show jewelry sales jumped 38.1 percent over the festival compared with a 16.4 percent increase in 2012. Sales of “high end” electronics, including Apple Inc. (AAPL)’s iPad and iPhone, jumped 36 percent in shops monitored by the ministry in the eastern city of Nanjing.
China UnionPay, which operates the country’s bank-card network, said the value of domestic transactions during the New Year holiday jumped 43 percent from a year ago. Card payments in jewelry shops surged 119 percent, while transactions in shopping malls climbed 44 percent, the company said on its website on Feb. 16. Payments in restaurants increased 17 percent.
The commerce ministry’s data are based on sales at “major retail and restaurant outlets” that it monitors, according to the statement, which didn’t specify the number of stores or whether the figures were adjusted for inflation.
The National Bureau of Statistics will release combined retail sales data for January and February on March 9.
Economic growth, rising incomes and looser visa requirements are prompting more Chinese to travel during the New Year holiday.
Travel agencies handled more than 4 million tourists visiting overseas, a 14 percent gain on last year, with Thailand, South Korea and Hong Kong among the hottest destinations, according to the National Tourism Administration.
China UnionPay said card purchases overseas jumped 33 percent compared with last year’s holiday. It teamed up with retailers, hotels and duty-free shops in nearly 20 countries and regions to offer discounts and gifts for users through February, according to a statement on its website.
Chinese shoppers overtook Americans last year as the world’s biggest buyers of luxury goods, accounting for 25 percent of global sales through purchases at home and overseas, according to a December report by consultancy Bain & Co.
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