Consumers drive China now
By Daniel Moss
The yuan’s ascent this year has brought with it some of the usual handwringing about the impact on China’s exports.
The anxiety kind of misses the point about modern China, as does much of the political conversation in America. A peek at the past week’s data from China is instructive. The really important numbers weren’t a decline in exports, but a jump in consumer sentiment and a rise in imports.
With consumption and services now accounting for more than half of gross domestic product, it matters less and less what the yuan does, absent a dramatic and abrupt shift that suggests a breakdown in policy or something seriously amiss. (It’s up about 7 percent versus the greenback this year.)
The rebalancing within China’s economy—long sought but rarely acknowledged since it arrived—also helps explain why the nation has beaten growth forecasts this year despite the incessant warnings that a heavy debt load just has to bring the place down.
I‘ve written before about the aggressive plans of Starbucks Corp. and what that says about the changing face of China’s economy. The country’s consumers are in an expansive and upbeat mood, according to a couple of barometers of sentiment. An index of sentiment published by the National Bureau of Statistics shows confidence the strongest since 1996. (Just to put that in some historical context: The revolutionary Deng Xiaoping was still alive.)
Lest those numbers be criticized because they are published by the government, Nielsen Holdings Plc came to broadly the same conclusion. Nielsen’s private consumer confidence index climbed to its highest since at least 2009. The guts of the report are even brighter: Willingness to spend hit a new high while readings on employment and personal finances also advanced.
Not that exports are insignificant. And it’s not like Chinese authorities are about let the yuan go where it pleases just because young professionals in Shanghai want an extra shot with their latte. But it’s not your grandfather’s China anymore. That textile plant that left North Carolina in the 1990s may not even be in China anymore. It may have moved somewhere cheaper long ago.
The yuan’s advance reflects at least partly the unexpected strength of the economy this year, a decline in the dollar, and authorities’ relative comfort with its movement for most of the year.
There are a few signs in recent days that regulators want to slow the momentum; little of substance happens with the yuan that authorities aren’t comfortable with. Market forces play a much greater role in the currency than they did in 1996 when consumer confidence was last this high, but it’s still a relatively limited role.
While Beijing figures out where it wants the yuan to be, the task has a bit less urgency thanks to the transformation of the economy. Now investors need better data on the new engine of the Chinese economy —so they are scouring industry and corporate data to build databases that best capture the consumer emergence.
Bank-card networks like China UnionPay can provide a potential goldmine of information on restaurants, hotels and real estate for those willing to put in the time. JD.com Inc., China’s second-biggest Internet retailer, has scores of indexes measuring sales of liquor, appliances, cosmetics and apparel.
More and more, the Chinese consumer’s habits may look familiar. There may even be data for that American lunch China is supposed to be eating.