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The China retail sales figures did not hit the projected target because of the country’s struggles with the COVID-19 Delta variant.
China recorded a slow growth of 2.5% in retail sales for the month of August from a year ago. The figure is much lower than the 7% earlier projected as the country battled the worst effects of Covid-19 since its early-2020 initial spread. Furthermore, China’s industrial production growth also came in marginally below expectations at 5.3%, compared to the 5.8%-prediction from analysts. Also, according to the National Bureau of Statistics’ recent data on consumer spending, there was an increase of 8.9% in fixed-asset investment for the first eight months this year.
The highly contagious delta variant ravaged much of Mainland China in late July. However, the region was able to largely bring the outbreak under control by mid-August. Authorities imposed travel restrictions and local lockdowns throughout the country under Beijing’s ‘zero tolerance’ policy. These were in effect throughout much of the summer holidays.
According to Chief Chinese economist at Macquarie, Larry Hu, these restrictions are the reason for China’s slow retail sales growth. Hu said:
“It’s hard for retail sales to return to the pre-COVID growth under the zero-tolerance strategy.”
He further stated that the continuation of the ‘zero tolerance’ policy depends on the vaccination ratio and efficacy. Hu also opined that the policy is likely to remain in place until the upcoming Olympics.
China Retail Sales Initially Rebounded in August
After much decline following the pandemic, retail sales began to regrow in August 2020. This was according to National Bureau of Statistics spokesperson Fu Linghui, speaking at a press conference on Wednesday. China had emerged almost completely from the height of the pandemic last summer. Furthermore, figures shown from August compare to a higher base than the first six months of the year. However, not every industry is in the clear as Linghui suggested. According to him, some “large-scale” real estate companies are experiencing production and operational challenges. The resultant effect across the entire industry needs to be monitored.
Chinese Real Estate Market Also Impacted
The real estate market in China is one of the industries worst hit by recent developments. Although the real estate and construction industries comprise over 25% of China’s national GDP, effective debt management by property developers in expanding their businesses has proven to be tricky. Investment in real estate development between January and August grew by 10.9% YoY. This represents a 0.3-percentage-point slowdown from the growth rate recorded in the first seven months of the year. Furthermore, according to statistics, real estate consumption remains weak. Head of macro and strategy research at China Renaissance, Bruce Pang observed this, adding that sales in home appliance and construction paraphernalia declined by 5% YoY.
Asia-Pacific stocks dipped in the wake of the Chinese retail sales slump. Hong Kong’s Hang Seng Index dropped by 1.6% in its final trading hour, and 1% for the third straight session. In addition, shares of casino companies dropped amid fears of more stringent regulations. Wynn Macau and Sands China both tumbled by over 27% each, while Galaxy Entertainment Group fell 18.39%.
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