Signs of strength from Singles Day
Those worried about China's economic slowdown have been given cause for a rethink by the success of Wednesday's Singles Day online shopping event. Combined sales from leading platforms Alibaba and JD.com topped 100 billion yuan (HK$121 billion), smashing records by 60 per cent. Declining trade and investment are largely behind the drop in growth, and reforms to lift the economy centre on encouraging domestic consumption. The sales highlight the potential and boost confidence that authorities are on the right track.
Singles Day transactions dwarf the nearest equivalent, the US' Cyber Monday, which last year generated US$2 billion. American consumers would have to spend that amount every day for a week to match the US$14.3 billion netted alone by Alibaba, the brains behind the annual event. Chinese shoppers are without doubt a force to be reckoned with when they pool their financial resources. That poses a dilemma for China's economic planners: how to get citizens to feel the same way about spending on the other 364 days of the year.
They need to do that to offset the declines in exports and imports brought about by the slowing domestic and global economy. China's GDP growth for the last quarter was 6.9 per cent and President Xi Jinping said earlier this month that a minimum of 6.5 per cent could be tolerated to achieve goals of doubling average incomes and the size of the economy between 2010 and 2020. Ensuring figures do not fall below that threshold requires shifting from traditional manufacturing to high-technology industries and increasing consumption.
The demand for goods on Singles Day reveals a robust appetite for spending; the challenge is spurring shopping with the same passion when bargains are not on offer. Increasing confidence in Chinese-made products is an important element and that will take time to build. A more timely response could be gained by further reducing taxes, especially on imports and items like jewellery. That would help the Chinese and global economies, spurring growth to mutual benefit.