China's Retail Sales Growth Slows
Retail sales in China slowed from 13.9% in the 12 months
to June, to 13.2% to the 12 months in July, showing a
modest decrease. The Chinese government said that the
figures confirmed that its policies for a "soft landing"
of the Chinese economy are continuing to work.
The government wants to increase its reliance on the
retail sector for growth, while cutting back on other
non-retail investment. The question has been how to cut
back wasteful investment, without hurting the retail sector
too hard. The simple answer is that more growth will come
from non-state owned, or private enterprises in the economy.
The overall trend is that the retail sector will take
an increasingly bigger piece of the economy as China's
economy develops.
In the major cities, job creation comes from new companies,
both western and Chinese, and virtually all private. The
great challenge is creating jobs in China's rural areas,
where the wealth gap is widening, and where there is not
enough investment.
Current policy is based on moving more and more of China's
population from the countryside to living in newly made
cities. China now has 166 cities with populations of more
than 1 million; the US has 9.
Economic policy has been focused on slowing down investment
in certain sectors of the economy, namely heavy manufacturing.
This is largely because much of the new investment is
directed into businesses which provide low return on investment
because of structural inefficiencies. In a few cases,
the Chinese central government has stepped in to stop
investment in certain major projects.
This has put the central government at loggerheads with
provincial governments, who want to encourage investments
in their own provinces. Current regulations require investments
of more than US$30 million to be sent to the central government
for approval; investments smaller than that figure can
be approved at the provincial level.
Some provincial officials have been prosecuted for taking
large projects of more than US$30 million and slicing
them into tranches, each of which has a value less than
US$30 million, and then approving them at the provincial
level.
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