Mid-single-digit growth expected for China's 2023 retail sales: Fitch

The rebound is likely to be more muted than in 2021 amid a weaker consumer outlook for employment and household income, which hinges on China’s pandemic-related polices. China will stick with its current approach, with possible finetuning to better target containment measures and reduce economic disruption, as shown in the 20 measures unveiled by central policymakers on November 11, 2022, said Fitch Ratings in a media release.

A modest pick-up in discretionary spending should benefit sectors that were hit hardest by mobility restrictions and weak consumer sentiment in 2022, such as apparel. This will help restore revenue growth to issuers such as department store operator Golden Eagle Retail Group Limited (BB+/Stable). The revenue at this issuer is expected to decline by 16 per cent year-on-year (YoY) in 2022.

Online retail sales are likely to continue outpacing offline sales, the segment’s market share growth is expected to decelerate, as refinements of pandemic-related mobility restrictions could incentivise offline spending. This would be similar to the reversion noted in 2021 following the initial pandemic impact. The projection also recognises an earlier forecast of an online retail penetration rate of 29 per cent in 2022, which is high in comparison with other countries.

A large deviation from the base case could alter the trajectory of China’s retail sales. An accelerated and consistent loosening of pandemic containment measures could boost economic factors, including reducing unemployment and eventually driving a more robust rebound in consumer sentiment and expenditure in the latter part of 2023—especially in discretionary items—after an initial period of heightened economic volatility jolted by wider virus circulation.

By contrast, a more prolonged period of strict controls, including the recurrence of hard lockdowns as seen in the first half of 2022, would diminish consumer confidence and the prospects of a recovery in spending.

ALCHEMPro News Desk (NB)