China’s retail sales
In April 2016, China’s total retail sales of consumer goods rose 10.1% YoY (year-over-year) to 2.5 trillion yuan ($0.4 trillion), which was lower than the growth of 10.5% in March, according to the NBS (National Bureau of Statistics). In the first four months of the year, retail sales rose 10.3% YoY to 10.3 trillion yuan ($1.6 trillion). The decline in retail sale growth sparked worries about a rebound in the Chinese economy.
The Chinese economy is transforming itself from an export- and investment-driven economy to a consumer- and service-driven economy mainly due to cooling in the manufacturing sector. In 2015, consumption contributed 66.4% to China’s GDP, up by 15.4% from 2014.
Online retail sales
E-commerce played a major role in driving up retail sales from January to April. Online sales in the first four months rose 27.5% YoY, accounting for about 11.1% of gross retail sales.
Impact on funds
The Clough China Fund Class A (CHNAX), the Guinness Atkinson China and Hong Kong Fund (ICHKX), the iShares China Large-Cap ETF (FXI), and the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (ASHR) have sizable exposure to the consumer discretionary sector. Thus, a decline in retail sales would adversely affect the performance of these funds. These funds invest in consumer discretionary companies such as Ctrip.com International Limited (CTRP) and Jumei International Holding (JMEI).
In the next article in this series, we’ll look at China’s new yuan loans and aggregate financing.