China: Consumers aren’t ready to drive the economy’s growth – NAB

According to analysts at NAB, Chinese economy is facing external pressures as authorities appear to be fighting the trade war on multiple fronts, including increasing tax rebates for exporters, loosening monetary policy and easing policy constraints on infrastructure developments.

Key Quotes

“Recent trends in retail sales point to a problem for Chinese authorities in attempting to combat US trade measures. China doesn’t consume enough – household consumption was only around 39% of GDP in 2017 – and isn’t growing fast enough (particularly recently). Real retail sales increased by just 6.6% yoy in August – below the growth rate of the broader economy in Q2 2018 – suggesting that consumers aren’t yet ready for a larger role in driving growth.”

“There are a range of factors that explain why China’s consumption has remained comparatively low. These include: inequality, weak wages growth, rising household debt, demographic changes and limited social security.”