Strong retail sales growth, weak growth in industrial production

The stock market had another marginally weak day, losing 0.3%, after dropping 0.4% yesterday, to close at 2438. There was no obvious reason for the decline and little volume in the market. On the one hand the statistical bureau released figures showing that industrial production rose by 14.7% year on year in July, below June’s 16.0%, which also happened to be the median estimate by most economists. This suggests the possibility of a future export-related slowdown, but is as likely to have been caused by Olympic-related pollution-measures, like closing of factories in the Beijing area.

On the other hand yesterday the statistics bureau released figures showing that retail sales grew at the fastest pace in nearly a decade. According to an article in yesterday’s Bloomberg:

China’s retail sales expanded at the fastest pace in at least nine years in July as incomes and prices climbed in the world’s fastest-growing major economy. Sales rose 23.3 percent to 862.9 billion yuan ($126 billion) after gaining 23 percent in June, the statistics bureau said today. That was more than the 22.4 percent median estimate of 19 economists surveyed by Bloomberg News.

This is good news because China very clearly needs to rebalance its economy away from its over-reliance on exports and investment, although it is unclear how much of this growth may be caused by Olympics fever. I entered the apartment building yesterday of one my friends, and on the ground floor under the stairs there were two sets of boxes that had obviously been part of the packaging of two very large television/entertainment units. My friend laughed when he saw the boxes and said that obviously his neighbors had bought new TV sets to watch the Olympics, and he told me that his parents had recently done the same. I guess this is happening quite a lot, and may affect the consumption numbers – at any rate TCL, China’s biggest consumer electronics company, said on Tuesday that it sold nearly 5.4 times as many liquid-crystal display TV sets in July than it sold in July 2007.

Originally published at China financial markets and reproduced here with the author’s permission.