Chinese consumers spent more than ever during the Lunar New Year, but the rate of growth in expenditure appears to be cooling, adding to evidence that curbs on credit are beginning to weigh on consumption this year, according to analysts.
Chinese consumers spent US$146 billion on activities ranging from eating out to moviegoing during the week-long holiday from February 15 to 21, a rise of 10.2 per cent from a year ago, according to China’s Ministry of Commerce.
Meanwhile, box-office receipts surged 52 per cent to 5.7 billion yuan (US$900.17 million) during the holiday period, led by domestic films such as Monster Hunt 2 and Detective Chinatown 2, according to Chinese ticketing website Maoyan.com.
However behind the numbers are concerns of mounting downward pressures on the economy, says Jiang Chao, chief economist at Haitong Securities.
He says rising lending rates in China is likely to drag on domestic consumption in 2018.
“Although consumer demand has been fully released during the Spring Festival holiday, the performance of the past week could only be described as barely satisfactory,” said Jiang.
In 2017 sales at restaurants and shopping malls during the holiday grew 11.4 per cent on year, outpacing this year’s 10.2 per cent rise, according to the Ministry of Commerce.
Jiang believes that rising interest rates will begin to take their toll on consumers some time this year.
China has rolled out successive measures over the years to cool down its housing market, especially in first-tier cities which now rank on par with Hong Kong and New York in terms of housing costs.
Lending rates for first-time homebuyers in 35 leading cities had risen to an average of 5.43 per cent at the end of January, representing a rise of 11 per cent over the benchmark rate, according to Rong 360, a provider of loan services. The lending rate was also up 21.8 per cent compared with the same period a year ago.
Four state owned Chinese banks in Guangdong province said in February they plan to raise the interest rate for first-time homebuyers by 10 per cent, while the rate for second home purchasers would rise by 15 per cent. Banks in Beijing raised interest rates by 5 to 10 per cent over the benchmark rate in January for first-time homebuyers according to the state-backed Securities Daily.
“The setbacks of a leveraged economy has started to surface, which will then pose downturn pressure on the economy,” said Jiang.
Meanwhile, analysts from UBS also expect slower growth this year.
The Swiss bank cited a cooling property market, slower infrastructure investment and ongoing deleveraging efforts among factors.
Still, UBS said the wider picture is of an economy going through a soft patch, rather than a major slowdown, with growth easing to 6.6 per cent from 6.9 per cent last year.
“We expect consumption to stay resilient, exports to keep a single-digit growth on continued global recovery, and investment to continue decelerating on slowing property and infrastructure investment,”said UBS economists Thomas Deng and Yifan Hu in a recent note.