Positive retail and residential market signs in China

Three weeks ago, in my blog, I described how retail sales and consumption were only very slowly returning in China, with much discretionary spending being held back as shoppers seemed to be hesitant in opening their wallets. The rebound in sentiment since then has been noticeable, with retail sales reported during the labour day holiday (1 to 5 May) by the Ministry of Commerce (MOFCOM) rising by 31.1% when compared with the Qing Ming festival of 4 to 6 April.

Anecdotally, retail streets in Beijing are bustling, retailers are seeing footfall start to return to near pre-Covid-19 levels. The automotive sector saw the first monthly increase in sales for nearly two years in April, as car manufacturers shipped two million vehicles to dealerships and stores, up 0.9% from a year earlier, according to the China Association of Automobile Manufacturers.

Uncertainty over sustainability of recovery 

The most recent official national retail sales data released by the National Bureau of Statistics (NBS) show April’s retail sales down 7.5% from a year earlier. With the prospects for May even more positive there are many reasons to be optimistic for a V-shaped retail recovery amidst a quick rebound in sentiment.

However, there remains much uncertainty about the sustainability of the post-Covid bounce. Firstly, whether the recent spike in demand is purely deferred from earlier in the year, secondly whether there was some therapeutic retail release following the lifting of restrictions – and perhaps most importantly, whether many of the negative impacts on the real economy are still yet to be fully realised. 

Residential markets continue stable recovery 

In parallel to the encouraging retail statistics, residential markets across China continued their recovery in April with modest price increases seen in most of the 70 cities tracked by the NBS. The continued release of pent-up demand, favourable demand and supply dynamics, and optimism around the economic recovery were all contributing factors.

Some 50 of the 70 cities tracked reported a rise in new home prices last month, an increase of 12 on the previous month. In the pre-owned residential property segment, 37 of the 70 cities reported price rises, five more than the 32 recorded in March.

With the virus seemingly under control, the lifting of restrictions has allowed property viewings to resume and showrooms to reopen as well as innovative online marketing strategies which have developed over the last few months. Market sentiment has also been supported by improved access to mortgages and low interest rates as the government has used monetary policy to stimulate the economy.

With the Lianghui (annual parliamentary) meetings currently underway, legislators are expected to announce fresh economic stimulus measures to spur domestic demand which will be supportive of both consumer and residential markets.