China's Retail Sales on the Rise

The global economic slowdown is hardly breaking news.  This weekend President Bush has organized an economic summit with twenty world leaders to work together to fix the problem, and on a smaller scale, various governments have proposed new economic packages to stimulate growth./span>

Chinaspan style="font-size: 9pt; font-family: Arial">'s has been the most ambitious to date, and last Sunday's announcement of a 4 trillion RMB ($586 billion USD) bailout has sent shockwaves throughout China/st1 :country-region>'s financial system.  The plan involves increased infrastructure investments, decreased taxes and increased export tax rebates, and a relaxed credit system as part of the package. /span>

Asian markets initially responded positively to the announcement, making strong gains on Monday before slight losses on Tuesday and slight gains on Wednesday.  Beyond this short-term response to the bailout remain the longer-term changes to China/st1 :place>'s economic system.  Many estimate that the changes to the financial system probably won't be felt until 2010, when many of the infrastructure proposals will be realized./span>

Despite the large picture in China at least one aspect of China/st1 :country-region>'s economy looks bright: consumer spending.  In the month of October, retail sales grew 22%, following gains of 23.2% in both August and September, up from the previous year. /span>

While it's possible that the November bailout package will encourage consumer spending, some economists expect a slowdown of consumer spending in the upcoming months.  Export growth has already slowed, up only 19.2% in October, versus 21.5% the month before.  /span>

In the long run, however, the new stimulus plan and the millions of potential jobs it could create should serve as a powerful catalyst to reinvigorating Chinas economy, with some analysts estimating it could even increase China/st1 :place>'s GDP growth by about 3% in 2009.  This growth wouldn't just improve China/st1 :country-region>'s economy; it could also trickle into global markets if Chinese consumers increase their expenditures./span>

Though the increased Chinese retail sales and economic stimulus package are a positive sign for Chinese consumption, who knows whether the momentum will continue? /span>