China online sales growth slowed in August — CNBC analysis

China online sales growth slowed in August -- CNBC analysis
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China online sales growth stalled in August, based on CNBC’s data. Analysts consider this as a sign of slow economic recovery.

The coronavirus pandemic has made online shopping popular, with retail sales increasing from about one-fifth last year to one quarter this summer.

“With unemployment stress and growth headwinds persisting into the fourth quarter, any recovery in overall consumption will be mild,” Imogen Page-Jarrett, research analyst at The Economist Intelligence Unit (EIU), said in an email.

According to the EIU, the job market this year will be the worst since the 1960s and the overall retail sales will contract by 4.7%.

Data from January to August showed that retail sales dropped by 8.6% from a year ago to 23.8 trillion yuan ($3.5 trillion).

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Meanwhile, retail sales in China managed to make up a small 0.5% year-on-year rise in August, according to China’s National Bureau of Statistics.

China online sales of consumer goods and services had a 13.3% increase in August, but it is slower than the 18.8% growth in July and a decline from 19% in June.

“Job loss, income reduction and higher leverage may create new weak spots in domestic demand,” Bruce Pang, head of macro and strategy research at China Renaissance, said in a statement. He mentioned a point from the State Council, the top executive body, that stresses the importance of increasing consumption for China’s economic recovery.

“Compared to before, an apparent trend we noticed is that young Chinese consumers are spending in a more pragmatic and responsible way after the pandemic,” said Jay Xiao, CEO of LexinFintech, which runs Fenqile.

“On Fenqile, sales of discounted products and preventive health-care products have been growing significantly faster than affordable luxury products or products celebrities use in the past few months,” Xiao said in a statement. He is optimistic about the recovery of online consumption in the coming months.

Another perspective

But for British economist Jim O’Neill, China’s economic recovery from coronavirus is accelerating and is positioned to drive global GDP.

He considered China’s economy as an important marginal driver of global GDP.

“I suspect Chinese GDP growth could actually end 2020 as net positive still,” O’Neill said during an interview with CNBC. “By end 2021, Chinese GDP growth will have possibly even made up for, not only the losses but the loss in the trend also.”

Other analysts, including the Asian Development Bank, also think China’s economy will turn out better than the rest of the world in 2020.

China’s GDP rose by 3.2% in the second quarter of this year, compared to a year ago. This figure exceeded predictions and led to a rebound from the first-quarter contraction.

In the same interview, O’Neill said that Brazil, India, and Russia are “considerably behind” in terms of economic recovery. “I suspect — with a lag — they will share in the V-like immediate bounce back, partially in Q3, but especially in Q4 2020,” he said.

“Beyond the impact of Covid, each of the other three, all have various structural issues to deal with,” O’Neill added by email. “In Brazil and Russia’s case, it effectively is to — somehow — reduce their excessive dependency on the commodity cycle, whereas, for India, it is to truly embrace productivity reforms that would allow their positive demographics to generate very strong GDP growth.”

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