In recent years, I have been skeptical of the Chinese consumption story as a part of investment strategy. Not that I don’t believe that the Chinese economy will be rebalanced towards a more consumption driven one, but my is view here is far less rosy than the bulls would like to think.
Late last year, I flagged small signs of slowing consumption in Hong Kong’s jewelry shops (whose owners I knew) as well as in Shanghai. Now there is further evidence that sales growth for this year’s Chinese New Year has slowed in the luxury sector (again, like jewelry) in Hong Kong, reflecting the slowing sales to the Mainland Chinese visitors.
From Bloomberg:
Chinese shoppers on their Lunar New Year holiday were less lavish than expected at Hong Kong jewelers, curbed spending on beauty brands and slowed spending at South Korean stores. They may keep that pace in the coming year of the dragon.
Holiday sales on the mainland grew 16 percent to 470 billion yuan ($75 billion), according to data from the Ministry of Commerce, the slowest pace since the 2009 financial crisis and three percentage points below last year’s increase. China is finding it is not immune to global economic forces and the slowdown is hitting Chinese consumers, who may increase this year’s spending at a slower pace than in 2011.
Not surprisingly, as the economy is slowing, and as the real estate bubble is bursting, people are naturally less happy to spend.