Reuters Writes: Ditch the stats: China retailers don’t buy signs of recovery

 

HONG KONG (Reuters) – If things are really starting to look up for China’s economy, as a recent spate of better-than-expected government data seems to suggest, nobody appears to have told its biggest retailers.

A Reuters review of first-half earnings showed that more than 20 Chinese companies selling everything from footwear to food were not convinced the economic slowdown had bottomed out, and neither were their traditionally thrifty customers.

“The reality behind the numbers is gloomier,” said leading footwear retailer Belle International Holdings Ltd as a raft of data, supported by government statements, indicated the world’s second largest economy may be stabilizing after two years of slumping growth.

“There are uncertainties in future prospects as the economy is struggling with a difficult transition involving structural rebalancing and revamping the growth model,” said Belle, which has a market value of $11.6 billion and manages more than 18,000 retail outlets across 360 Chinese cities.

“As a defensive reaction, consumers are becoming more inclined to save and less willing to spend,” it added.

Economists have long doubted the accuracy of official economic data and this skepticism has increased as China plots a course towards consumption-led growth. The official retail sales measure, for example, counts a sale from when an item is shipped, rather than when it is actually sold.

The latest data, however, supports retailers’ complaints.  Read the rest of the article here

Listen, Chinese story is fairly easy to understand. Most of Chinese economic growth over the last decade came from massive infrastructure and real estate misallocation.  I say misallocation because there are literally empty cities in China.  If you haven’t already please watch this excellent report by 60 Minutes Here.

Now it is too late. China is left with huge misallocation that cannot just be dismissed. They must collapse. As the US Market slows down and shifts into recessionary environment over the next few years, as European Union continues to drag its feet in its own dysfunctional economic disaster,  I would expect Chinese export based economy to slow down significantly.

The most important question here, is what happens to the Chinese government when property prices finally collapse in China and Chinese families lose all of their multi-generational savings (something that every Chinese believes is impossible).  Of course, as financial professionals we must always look at the other side of the trade when 99% believes otherwise.

I believe we are in for some fireworks in China and fairly soon.  Within the next 5 years.  In fact, I believe we are in for a revolution in China as the government losses control.  One thing is for certain, it will be exciting to watch. 

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