China holiday sales grow at slowest in decade amid crackdown on graft

Lunar New Year holiday spending on mainland rises 13.3pc year-on-year amid graft crackdown

PUBLISHED : Friday, 07 February, 2014, 2:54pm
UPDATED : Saturday, 08 February, 2014, 3:15am

Lunar New Year holiday spending on the mainland grew at its slowest pace in at least a decade as the Communist Party's crackdown on corruption deterred the giving of luxury gifts.

Retail sales from January 31 to February 6 rose 13.3 per cent to 610.7 billion yuan (HK$776.4 billion), the Ministry of Commerce said on Thursday.

Adjusted for retail price inflation, the decline in the growth rate from 14.7 per cent during the holiday last year would be milder, said Chang Jian, an economist at Barclays Capital.

"The anti-graft campaign has made consumption cheaper and more affordable for Chinese households," Chang said.

She expects full-year retail sales growth this year of 14 per cent in nominal terms, up from last year's 13.1 per cent, even though GDP growth is projected to slow to 7.2 per cent this year from 7.7 per cent last year.

Chang forecast consumer inflation of 3 per cent this year, up from 2.6 per cent last year.

Prices remained stable during the holiday period from the previous week, with no change in rice prices and a 0.5 per cent increase in the price of pork.

Sales of luxury items slumped, while electronic and jewellery products sold well.

Sales of luxury gifts and alcohol fell 70 per cent in some shopping centres in Fuzhou , Fujian province . Sales of expensive cigarettes and alcohol at some retail outlets in Luoyang , Henan province, declined 40 per cent.

High-end restaurants in Heilongjiang province reported a 20 per cent slump in sales. Some establishments had to restructure and cater to the mass market, the ministry said.

Sales of mobile phones and computers more than doubled in Hebei province. Sales of home appliances grew 61 per cent in Gansu province.

Jewellery sales rose 35 per cent in Hubei province, 31.6 per cent in Liaoning province and 30.2 per cent in Heilongjiang.

"The numbers are relatively healthy, given the circumstances," said Alaistair Chan, an economist at Moody's Analytics. "The government's actions in curbing official spending and cooling the housing market are working to slow consumption, but I think underlying demand is still strong because wages are still growing at a robust pace."

Nominal urban disposable income grew 9.7 per cent last year, while rural household income jumped 12.4 per cent.

ANZ chief economist Liu Ligang said: "If the official spending can be used more on the social and economic welfare of the people, China's consumption will pick up more quickly, because of the reduced [need to set aside] precautionary savings."