Hao HONG 洪灝, CFA (@HAOHONG_CFA) “Chinese economic data released yesterday were weak on the surface. Retail sales” — TopicDigg

Chinese economic data released yesterday were weak on the surface. Retail sales growth was negative, and growth in fixed assets and property investment declined further in May. The cash-for-clunkers subsidy has been suspended, and car sales were down 16%. Car sales alone dragged down retail sales growth by 150bps. However, service spending rose strongly by 5.4% y/y. It suggests consumer spending is now more on services than on goods. The Chinese consumer no longer uses things but instead uses experiences to define themselves. These numbers are consistent with our field observations. Further, while retail sales growth declined, high-tech exports were up strongly, diverging from the traditional manufacturing sector (chart). As such, economic data paint a picture of a country’s economy undergoing restructuring, and the process is powering ahead. This change is what we have been waiting for and talking about for years. Too much attention has been drawn to headline numbers without looking under the hood. And thus a wrong conclusion was drawn by consensus. Time to look at Chinese data differently.