China, Socialism & Consumer Behavior: Consumer spending helps boost Shanghai’s growth

Shanghai’s  economy made further progress on October/2009 as a result of continued strong growth in local consumer spending and investment, while exports also improved to help strengthen a growing recovery.

The city’s retail sales gained 14.1 percent year on year to 46 billion yuan (US$6.7 billion) September/2009, staying in line with growth in the previous two months, the Shanghai Statistics Bureau said recently.

Consumer spending was lifted by car sales that soared 20.9 percent from a year earlier, thanks to the Chinese government subsidies for energy-efficient vehicles.

Urban fixed-asset investment in the city expanded 13.9 percent on an annual basis to 425.7 billion yuan (nearly 60 billion US dollars) in the first 10 months, cooling a bit from the jump of 14.1 percent in the first three quarters after China ordered a contraction of excess production capacity.

Foreign direct investment grew 4.8 percent to US$890 million last month, indicating renewed confidence in Shanghai by overseas investors.

Exports, the weak link in Shanghai’s economy, declined 10.7 percent last month from a year earlier to US$13.3 billion. But it was the smallest drop so far this year and compared with a retreat of 16.3 percent in September/2009.

“It is hard to predict when the city’s overseas sales can return to former prosperity due to escalating trade frictions, despite better global economic conditions,” said Xue Jun, an analyst at CITIC Securities Co.

Declines in imports widened last month to 9.2 percent from September's 3.4 percent due to smaller purchases of raw materials on the global market after the order to control overcapacity.

“Shanghai is well on track to sustain its recovery, despite the blow from declining exports that may continue for awhile,” said Li Maoyu, an analyst at Changjiang Securities Co.

“It is important for Shanghai to upgrade its industrial structure, move toward a service-led economy and provide more value-added goods to stimulate consumption,” Li said.

He said Shanghai has huge potential for further development, boosted by the Shanghai World Expo in 2010 and a planned Disneyland in the Pudong New Area scheduled to open in five to six years.

Shanghai’s consumer prices continued to dip in October/2009, helping to sustain the China’s relaxed monetary policy.

The Consumer Price Index, the main gauge of inflation or deflation, fell an annualized 0.3 percent last month, easing from a decrease of 0.5 percent in September.

The city’s gross domestic product increased 9.8 percent year on year in the third quarter of 2009, according to earlier reports.

via Consumer spending helps boost city growth — Shanghai Daily — English Window to China New.

Itamar Medeiros

Originally from Brazil, Itamar Medeiros currently lives in Germany, where he works as Lead Product Design Strategist at SAP and promotes User Experience Design as visiting lecturer at Köln International School of Design. Working in the Information Technology industry since 1998, Itamar Medeiros has helped truly global companies in several countries (Argentina, Brazil, China, Germany, Hong Kong, India, Mexico, The Netherlands, Poland, United Arab Emirates, United States) create great user experience through advocating Design and Innovation principles. During his 7 years in China, he championed the User Experience Design discipline as User Experience Manager at Autodesk and Local Coordinator of the Interaction Design Association (IxDA) in Shanghai

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