China — Record Singles Day sales despite economic growth grinding lower
World Risk Developments November 2019
Sales during China’s annual Singles Day surged 26% to a record US$38 billion in 2019. Sales hit the US$1 billion threshold after just 68 seconds. The world’s largest online shopping event was a boon for Australian exporters, who collectively ranked fourth for foreign sales (behind Japan, the US and the Republic of Korea).
The record result came amid a continued slowdown in China’s economy. Regulatory efforts to rein in financial risk and debt, coupled with prolonged Sino-US tensions, are dragging on domestic confidence and demand. October growth in retail sales was less than expected, and China’s third-quarter GDP growth rate of 6% was its lowest since the government started releasing quarterly data in 1992. Nonetheless, China remains on track to meet its 2019 GDP growth target of 6-6.5%.
While China’s government has shown significant policy restraint to date, worsening economic data increases the likelihood of further monetary and fiscal stimulus to cushion the slowdown. China has historically relied on infrastructure investment to prop up growth. However, with total debt topping US$42 trillion (306% of GDP or 17% of global debt) in the first half of 2019, the government remains wary of a reversion to credit-driven growth. This would exacerbate the long-term risks China’s economy already faces. Instead, China is seeking to upgrade its economy by transitioning to a more sustainable services- and consumption-driven model. Cementing consumption as the mainstay of China’s growth model should hopefully result in increased opportunities, including for Australia’s 53,000 goods exporters.