Leading Indicators Stayed Flat

Leading Indicators Dec-15

China’s Leading Economic Indicators for December remained flat at the lowest level in the last year and a half.  Given all the noises coming out of China in recent weeks, the January numbers are expected to drive even lower. We have yet to see evidence from the consumer sector that the overall slowdown is effecting buying decisions.  We will keep our eye on changes in retail sales growth when it’s available.

Sources: Trading Economics; National Bureau of Statistics China

From Nobel Prizing Winning Joseph E. Stiglitz, Professor, Columbia University

China-US Focus logo

Writing in the online journal China-US Focus Professor Stiglitz said the following:

“China’s shift from export-driven growth to a model based on domestic services and household consumption has been much bumpier than some anticipated, with stock-market gyrations and exchange-rate volatility inciting fears about the country’s economic stability. Yet by historical standards, China’s economy is still performing well – at near 7% annual GDP growth, some might say very well – but success on the scale that China has seen over the past three decades breeds high expectations.

There is a basic lesson: “Markets with Chinese characteristics” are as volatile and hard to control as markets with American characteristics. Markets invariably take on a life of their own; they cannot be easily ordered around. To the extent that markets can be controlled, it is through setting the rules of the game in a transparent way.

All markets need rules and regulations. Good rules can help stabilize markets. Badly designed rules, no matter how well intentioned, can have the opposite effect.“

Professor Stiglitz suggests that China can learn from the supply-side / demand-side debate that has gone on in the west for the last thirty years.  Source: China-US Focus

Two Sides of the Same Coin

Consumer - Business Sentiment Jan 16

Chinese consumers ended 2015 with a positive attitude – two months of improved sentiment.  Then they added a third month of upward movement in January.  We know what happened in China’s general economy and it wasn’t good.   How disconnected are the people of China from the overall economy?

By comparison business sentiment turned down in January, as would be expected.  But even this downward move is not in line with the extremes that are being reported.  Confused.  Time to question the polling. Source: Westpac MNI China Consumer Sentiment; Westpac MNI China Business Sentiment

Tech Investments Exploded in 2015

Tech Investments

Chinese investments in technology exploded in 2015 to $36 billion – a 218.6% increase compared to 2014, which in itself was a breakout year.  To put 2015’s growth in perspective, it represented 65.5 % of technology investing over the six year period from 2010 through 2015. Source: TechInAsia

Wisdom from Goldman Sachs

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Sharmin Mossavar-Rahmani, chief investment officer at Goldman Sachs appeared on Charlie Rose a couple weeks ago. The discussion was a ten minute, broad view of the world economy. About China she noted that, “Concerns…are a little overblown” because China’s economy does not have that much effect on the US economy when one looks closely at the actual numbers. Goldman expects Chinese growth to be between 5.8% and 6.8% in the near term future, an estimate supported by underlying data she said. Source: Charlie Rose Show

Year of the Red Fire Monkey

Year of the Monkey

Almost 20% of the world’s population is celebrating 2016’s Year of the Red Monkey today and for about 15 days going forward.  The day is the first new moon day in the first lunar month of the Chinese calendar for the Chinese year 4,713. China has been around for a long time.  It all derives from an era when the ancient dynasties would issue the calendar for the new year that gave guidance to farmers on everything from planting to harvesting.  The first Farmer’s Almanac.

What’s it mean for the west?  Basically, the country shuts down for the better part of two weeks while Chinese folks travel from work in the city to their family homes.  They have about a week off before travelling back to work during which time there will be millions of heads down with eyes on a mobile screen.  Good for advertisers.  Source: www.chinesefortunecalendar.com/

Documenting 2015’s Mighty Growth for both Pure Online and Hybrid Online-to-Offline Sales

Online Shopping Paterns

The latest report from iResearch demonstrates the rapid growth of China’s online shopping.  Pure online volume was up 37% in 2015 compared to 2014. But the underlying story may be as important.  The growth of online-to-offline (O2O) offers great potential.  Chinese people are expanding their smartphone purchasees to book and pay for taxi rides, food delivery, movie tickets and other local services.  This growth tracks closely with the iOS phone sales throughout 2015.  Projected O2O growth by 2018 is an impressive 86.3%.   Source: InsideRetail.Asia

Evidence of China’s Thriving Movie Business

China Box Office

Three of the top10 box office hits in China last year were imported from the US.  All were franchise movies with long histories and notoriety that preceded them.  Big ticket sales for the seven home grown films suggest the vibrancy of China’s local film industry.  Missing is Star Wars, which opened very late in the year, too late to show up in this list, but surely destined to the top list for 2016.  Source: Hollywood Reporter

Chinese Consumers Research Before Buying

Pre-Purchase Research

The TNS’ Connected Life Study is based on interviews with 2,085 connected individuals in China.  The subjects researched online and offline essentially the same amount.  The research extended beyond the high-end products one would expect such as cars, flights, technology, holidays and financial services, going into less expensive categories such as personal care products where more than 80% of purchases are made after researching online.  Read ’opportunity.’

Among the connected, 52% buy the exact brand they had researched.  Though many start their search with a particular brand in mind, 35% are open to changing brands. Note to advertisers: offers and incentives delivered at the right time can effect on the ultimate purchase.  Personal care buyers are the most susceptible to these incentives.  Twenty-eight percent can be labeled ‘exploratory’ buyers.

Study conclusion: “To be successful, brands, retailers and manufacturers need a deep understanding of how and where people research purchases to ensure the right kind of information is in the right place at the right time.” Source: TNS’ Connected Life study

Alibaba as an Economic Indicator

Alibaba's GMV Q415

Highlights from Alibaba’s fourth quarter:

  • Profits doubled
  • Sales up by one third
  • Mobile sales tripled in year-over-year quarters as monthly mobile users reached 393 million.

Supporting data from eMarketer says that the company represented 35% of the $15.8 billion mobile ad market.

Words from Joe Tsia, Alibaba’s executive vice chairman, “The Chinese economy is going through a structural shift to more moderate, but more sustainable, growth.  It’s still one of the fastest growing economies in the world and we have no reason to think anything different in the future.”

In contrast to the reporting about the slowdown in China’s overall economy, we have made the point in the past that the decline is in the manufacturing sector and that the consumer economy is still humming along.  These data are consistent with that assessment.  Source: New York Times