Shenzhen trails Hong Kong in the consumption of luxury goods, with spending hit by the Chinese government's crackdown on corruption and by local people heading across the border to shop in tax-free Hong Kong – Shenzhen residents have multiple-entry visas for cross-border travel there.
Shenzhen has 10 per cent the number of luxury goods shops Hong Kong has, and a third of Beijing's and Shanghai's, according to the 21st Century Business Herald.
The city is keen to address that imbalance with the opening of two major luxury malls within a short time of each other – Wongtee Plaza and the Mix C mall. Another 10 malls are planned to open in the next two years.
For now these malls are hardly thronged, generally feeling a bit empty, with more rubberneckers than active consumers, but one learns, over the years, to be wary of criticising developers in China for creating excess capacity.
The Field of Dreams philosophy – if you build it they will come – seems pertinent in China in ways that often do not make traditional sense, but having seen this happen on numerous occasions in Beijing, I wouldn't be surprised if these malls are soon hopping.
Certainly there is optimism around about the prospects for the Chinese economy, but it remains fairly guarded.
"Our China Activity Proxy suggests that there was a strong rebound in economic growth at the end of Q2. The property sector remains a drag, but this was more than offset by relatively broad-based strength elsewhere," said Capital Economics in a research note.
Shift of focus to reforms
Barclays
believes that, as growth stabilises, the government will shift its focus to reforms in the second half of the year.
“We look for more details on budget/tax reforms, Hukou reform, SOE reforms, capital account opening (QFII and RQFII quota expansion, the Shanghai-Hong Kong Stock Connect) and exchange rate reform, and further financial market liberalisation and regulations on internet finance and shadow banking,” it said.
Philip Uglow, chief economist at MNI Indicators, said consumers appeared more convinced actions taken by the government would help to support the economy over the long term, but remain less optimistic about the current state of business or their personal finances. "While our sister business survey shows a noticeable pick-up in confidence, the more subdued consumer sector cautions about getting too optimistic over the outlook for the rest of the year just yet," he said.
The Westpac MNI China CSI increased 1.9 per cent to 114.8 in July from a near one- year low of 112.6 in June. Sentiment was further above the break-even 100 level, meaning optimists outnumbered pessimists, but confidence remained below the 118.9 average of the past 12 months.
