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MNI REALITY CHECK: China Sep Sales Likely To See Modest Uptick

Modest recovery expected in China's retail sales as consumers head into the Autumn holiday season.

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China's September retail sales likely saw a moderate recovery from August's more than one-year low as services spending rebounded after the sporadic outbreaks of Covid-19 cases eased, but any uptick would still be tamed by weaker spending on big-ticket items including cars and home-related products, industry insiders and analysts told MNI.

"Retail sales may modestly recover to 3.7% y/y in September from August's 2.5%," said Zhang Yu, chief analyst at Huachuang Securities. Zhang noted that the Ministry of Commerce has said in its latest forecast that annual retail sales could reach CNY44 trillion, growing about 12.5% over 2020, or 8% over the more normal 2019, and Zhang believes growth should be 3.8% from September through December.


Tourism is still affected by the epidemic, with tourist numbers during the September/October holidays less than seen in the Spring break, said Zhang. During the Mid-Autumn Festival in late September, some 88.2 million travelers – about 87.2% of the volume in the same period in 2019 – spent CNY37.1 billion over the three-day break, equivalent to 78.6% of the pre-pandemic level, according to the Ministry of Culture and Tourism.

"Business is much slower than usual, even during the traditional tourism peak of September and October," said a staff member at the Changsha China Youth Travel Service in Hunan province where the resurgence of local Covid-19 cases in July triggered a tourism shutdown. Though all the scenic spots were reopened in early September with discounts offered, concerns over the virus and anti-epidemic measures are still keeping people away from long-distance trips or traveling between provinces, the staff member said.

"Normally, we receive about 20 people per day for independent tour during the peak time, but only one or two people came to us during the last holiday," said the staff member.


The global chip shortage continues to weigh on auto production, which is restricting sales of new models.

According to China Passenger Cars Association, retail sales of cars totaled 1.58 million in September, falling 17.3% y/y, which was flat from the level seen in September 2014. On a monthly basis, it only grew by 9.1% from August, the lowest point in Q3, which is relatively sluggish when compared with the at least 20% growth in September of previous years, the CPCA said.

Although the commerce ministry has put policies in place to promote new auto sales as well as the replacement of used cars, measures have not been rolled out on a large scale at local level, and the auto market is not at the front of consumer thinking during the holiday season, the CPCA said.

Auto makers are struggling due to the strained overseas supply of key chips and components, while dealers are also under pressure amid low inventory levels and try to retain customers through deposits, building up the delivery pressure, according to the CPCA.

Meanwhile, the rapid cooling of the real estate market amid tight housing regulations will curb the growth of home-related spending, said Wang Jingwen, a senior researcher at the Pangoal Institution.

The median of analysts' expectation for September retail sales polled by Bloomberg was 3.5% y/y, up from August's 2.5% gain. The data will be released Monday, October 18 at 1000 Beijing Time.