China’s Retail Sales, Disposable Personal Income and Consumer Spending – Metrics for a Transitioning Economy


Perhaps the number one mistake analysts tend to make when trying to understand China’s economy pertains to simply acknowledging certain facts in a superficial, quasi-axiomatic manner. They read the right charts, draw the right conclusions but don’t internalize the importance of the mega-trends they’ve just been exposed to.

If you ask them about China’s infrastructure, they’ll talk about its growth over the past years or decades in a robotic manner. Tell them to share their opinion about China’s growing internal demand and, again, you’ll find them enumerating a bunch of platitudes. While hard to express in words, the difference between an entity such as which actually does business in China and the average analyst is essentially the difference between proverbially talking the talk and walking the walk.

Charts aren’t just random visual representations of lifeless numbers. On the contrary, they paint a beautiful picture of reality of you know how to interpret them. For example, grab any retail sales YOY chart and you’ll notice how between 1993 and 2019, China’s average yearly retail sales increase was a whopping 13.81%, with a record high of 37.4% back in December 1993 and only month in which a less than 5% increase was registered compared to the previous year: the month of May 2003, with its 4.3%.

As far as the financial dimension of its existence is concerned, China occasionally encountered bumps along the road. For example, its stock market experienced a dramatic crash as a result of the 2007-2008 Global Financial Crisis and never reached new highs, with another crash taking place in 2015-2016, followed by a disappointing recovery and a fall to 2014-level lows. Analyze stock market charts and you will become a pessimist. Take a look at charts which depict the status of the average consumer and you will become an optimist. Form a complex opinion by factoring them all in and you will, finally, become a realist.

As a comparison, the United States can only put a 4.36% average on the table for the same period (1993 to 2019) and its record of 11.2% was reached in March 2004. The fact that the average for the US over a multi-year period is just 0.06% higher than the lowest month for China (the one-month outlier, 4.3% for May 2003), as well as China’s 13.81% average being higher than the 11.2% record month of the US, speak for themselves. Let’s not even dwell too much on the fact that the US YOY growth rate was below 1% for a reasonable amount of time and even deep into negative territory for several months, with -11.5% being the reality of March 2009.

Other metrics paint an identical picture. When it comes to China’s consuming spending data, which has been tracked over a much longer timeframe, the fact that consumer spending went from 453 CNY back in 1952 to 348,210 CNY at this point (with there still being ample room to grow) leaves little room for interpretation. Or the disposable income of the average Chinese citizen, up from just 343 CNY in 1978 to 39,251 CNY in the present.

Why has there been so much growth? There are two broad reasons:

  1. Objectively speaking, it’s what tends to happen when you have such a low starting point. Let’s face it, China was anything but a wealthy nation prior to embarking on its path toward reform back in 1978. The average citizen has trouble surviving, which led to programs such as the Food-for-Work one, citizens who would have found the very idea of having excess income at their disposal ludicrous. Let’s just say that when you’re not necessarily at rock bottom but not that far away, there’s pretty much no way to go but up
  2. The fact that visionaries such as Deng Xiaoping with his Four Modernizations had the foresight of implementing generation-defining changes in a way that was also ideologically acceptable, thereby unleashing the true wealth generation power of the Chinese population. Yes, China was a poor nation but not all poor nations experienced similar growth over the past few decades. On the contrary, many were continuously decimated by internal conflicts as well as less than ideal leadership options and as such, came nowhere near to China in terms of growth rates

A balanced analysis needs to be objective enough to acknowledge that China was indeed an under-developed nation and in many respects (GDP Per Capita-related ones, for example) is still far from parity with its Western counterparts. At the same time, however, it greatly outperformed other nations which were in a pretty much identical starting situation, with retail sales numbers, disposable personal income statistics and consumer spending data making that crystal-clear.

These three vital metrics for a transitioning economy paint an accurate picture of China’s reality. The reality of a formerly under-developed nation which managed to find its way economically-speaking, in a true financial Cinderella tale. Unlike fairy tales, however, its journey was and still is paved with many threats (with the previously mentioned stock market situation representing an eloquent example to that effect) but all things considered, it is hard if not impossible to build narratives which don’t revolve around China winning on most important fronts.

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