Boston, MA -- (ReleaseWire) -- 09/21/2012 -- The China Retail Report examines the long-term potential of the local consumer market, but flags shortterm concerns about the impact on China's economic outlook of the build-up of bad debts in the banking sector, together with sticky core inflation.
The report examines how best to maximise returns in the Chinese retail market while minimising investment risk. It also explores the impact of a prolonged slump in the eurozone and problems in the US on the Chinese consumer as well as on the ability of producers and exporters to realise returns in the short term.
The report also analyses the growth and risk management strategies being employed by the leading players in the Chinese retail sector, as they seek to maximise the growth opportunities offered by the local market.
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Chinese per capita consumer spending is forecast to increase by 52% to 2016, compared with a regional growth average of 58%. China comes first (out of seven) in BMI's Asia Retail risk/reward ratings. Among all retail categories, automotives will be one of the outperformers through to 2016 in growth terms, with unit sales forecast to increase by nearly 66% between 2012 and 2016, from 19.81bn units to 32.83bn units as national manufacturers use their experience of joint ventures with internationals to develop their own brands.
In the competitive arena, BMI sees upside potential in the government's recognition of the potential of alternative-fuel vehicles and the consequent implementation of a pilot incentive scheme.
Over the last quarter, BMI has revised the following forecasts/views:
- China's real GDP came in at 8.1% y-o-y and 7.2% quarter-on-quarter (q-o-q) on a seasonally adjusted basis in Q112, much weaker than consensus expectations. Unlike the situation facing the economy in Q109, when a recovery in exports combined with a fiscal stimulus programme resulted in a V-shaped recovery, this time around BMI expects continued lacklustre growth even as the central bank is likely to loosen monetary policy. Our core view of a hard landing remains unchanged, and we are sticking with our 7.5% real GDP growth forecast for 2012.
- While BMI expects private consumption to be an outperformer in 2012 as downside to growth is limited given the high savings rate, the consumer will not emerge unscathed from the economic downturn as falling home prices undermine household wealth. We also expect the unemployment rate to rise, acting as a further drag on consumption. We forecast 8.5% growth in private consumption in 2012, versus an estimated 9.0% in 2011, although we note that actual conditions on the ground are unlikely to be as rosy as this headline figure paints.
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