Some analysts are concerned that retail sales in China is down 13.1 percent year on year in July from the previous month’s 13.7 percent. “Luxury brands, especially jewelry and watch brands, were growing at 20 to 30 percent for several years. Late last year, that suddenly dropped off,” said Jackson Wong, Vice President at Tanrich Securities.
Others — like Shaun Rein of China Market Research Group — are not as concerned: they see where the money is going. “Fears of retail sales slowing are far over exaggerated. Consumers are confident. Wages are still rising and they’re spending more on movies and other experiences or buying overseas – and that’s not factored into retail sales,” Rein said.
China is experiencing a shift in consumer interests. For many buyers, it’s no longer about spending money to show off, but to feel good. This means a decrease in spending on designer fashion an increase in money spent on things like travel, movies, and sporting goods.
In these areas, the growth is going up, up, and away. For the first half of this year, China’s box office total grew 42 percent compared to last year. And according to the Beijing Municipal Tourism Development Committee, the number of Chinese outbound travelers grew 70 percent year on year over the first six months of 2012. According to the World Tourism Organization, 78 million Chinese are expected to travel abroad this year. If this proves true, China will attain the title of world’s biggest exporter of tourists for the first time.
Wong explains that although money may not be scarcer than it was before, it is becoming more precious to those who work for it. “When people came out of the [2008-2009] financial tsunami, they realized their money is hard-earned, not just for show. They want to enjoy it and not just spend it,” he said.
Patrick Chovanec, Associate Professor at Tsinghua University in Beijing, discussed this phenomenon a bit more technically. “The shock effect of a drop off in GDP may make people willing to spend less. It doesn’t mean they can’t afford to spend, but it could mean that people who are unsure of the future may not spend as much,” he said.
And perhaps the average Chinese consumer says it best: “I think it’s better when you pay money for relaxation. The feeling is different. I’d rather go out and have fun,” said Wendy Yu, a 25-year-old graphic designer who recently chose two holidays with friends over a new Louis Vuitton bag.
photo credit: conrad sanya haitang bay