China’s retail sales lost their shine in May
In May 2016, China’s total retail sales of consumer goods rose 10.0% YoY (year-over-year) to 2.7 trillion yuan, slightly lower than the 10.1% growth recorded in April, according to the National Bureau of Statistics, or NBS. Meanwhile, in the first five months of the year, retail sales rose 10.2% YoY to 12.9 trillion yuan, while on a monthly basis sales grew by 0.76% in May. This was slightly lower than growth of 0.79% recorded in April.
Chinese consumers are saving their money rather than spending due to growing uncertainty and a general economic slowdown. Thus, retail sales have slowed down considerably. The decline in retail sales sparked worries about the Chinese economy.
Retail sales in urban and rural areas
Retail sales of consumer goods in urban areas grew by 9.9% YoY in May, while sales in rural areas rose by 10.7% YoY. From January to May, retail sales of consumer goods in urban areas rose by 10.1% YoY, and sales in rural areas rose by 10.9% YoY.
Rural areas are increasingly contributing to total retail sales due to a rise in online shopping.
Online 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 are invested in consumer discretionary companies such as Ctrip.com International (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.