China’s retail sales data continue to surprise the market
China’s total retail sales of consumer goods rose 11.0% year-over-year (or YoY) to 2.8 trillion yuan in October. The data indicated better-than-expected growth in retail sales and a slight improvement from September’s rise of 10.9%.
On a year-to-date (or YTD) basis from January to October, the total retail sales of consumer goods reached 24.4 trillion yuan, up by 10.6% YoY. The sale of mobile phones, building materials, and household products led to the strong growth in retail sales.
A rise in retail sales is a step toward the transition of the Chinese economy from an export-oriented to a consumer-driven economy. This is highly recommended because export orders are falling due to weak global demand. This is the aim of Chinese authorities as well. However, with the slowdown in Chinese local and foreign sales, an increase in retail sales comes as a surprise and a bright spot in the Chinese economy.
Online retail sales
E-commerce played a major role in driving up retail sales. From January to September, the national online retail sales of goods and services grew 34.6% YoY to 3.0 billion yuan, according to the National Bureau of Statistics of China.
Urban and rural retail sales data
Urban retail sales of consumer goods rose 10.8% YoY to 2.4 trillion yuan in October. On a YTD basis, urban retail sales rose 10.4% YoY to 21.0 trillion yuan.
Rural areas have become a major source of retail sales growth. Retailers are focusing on rural China to increase the penetration of e-commerce. In October, rural retail sales rose 12.2% YoY to 0.38 trillion yuan. On a YTD basis, they rose 11.8% to 3.4 trillion yuan.
Impact on mutual Funds
The Clough China Class A Fund (CHNAX), the Guinness Atkinson China & Hong Kong Fund (ICHKX), and the Eaton Vance Greater China Growth Class A Fund (EVCGX) have more than 10% exposure to the consumer discretionary sector. So a rise in retail sales would benefit them the most.
However, the John Hancock Greater China Opportunities Class A Fund (JCOAX) had only 6.4% of its assets invested in the consumer discretionary sector. So a rise in retail sales will have a lesser impact on the performance of that Fund.