Retail in China rose by 22%. Good news. A solid proof of decoupling, isn't it?
Wait. Question: By what percentage the wages has increased in China since last year?
20% at least. Middle management and professionals have even higher percentage as shortage is there.
But do we still have shortage this year? Or has the gap been narrowing? According to my little survey on headhunters, the answer is "YES', particularly on real-estate, finance, investment, and professional services related areas. These people belong to one of the groups who can spend most.
The decline of sales on telecommunication and electrical appliances and household related decorative and utilities materials, another part of the domestic consumption, which takes a big pie on manufacturing, tells another story. The decline on real-estates and investment has already started to affect on certain area. Another area that was not told in the statistics is restaurant. The middle-to-high class dining places have been closing ever since the lower half of the year.
Clothing rose. But please pay attention that the real famous brand name fashion companies all have significant loss, including China areas, in their income statements. Daily casual clothing is not much affected: afterall, you will not go naked on the street, aren't you?
One should never forget that the largest pie on GDP is still export. Yet, influence on the consumption due to weakening export takes time to effect. It has to walk through the supply chain, shut down the factories that solely rely on exports, laid off their labour, cause the remaining to focus on domestic market, initiate another round of survivors' games, kick out the unfit, cause another lay-off wave, cripple some stores, layoff the labour related to that sector, and eventually settle.
Won't the 4t RMB stimuli program bail China out from this miserable future? Government spending project can certainly prevent or at least delay the worsening. But it cannot simply reverse the trend and boost China economy to a new level. For details, please refer to my previous articles.
Afterall, this year China workers have salary risen. How about next year?