There has been ongoing scepticism about the reliability of China’s GDP figures. This has intensified recently because the growth rate of 6.9 per cent in the first three quarters did not seem to be consistent with the weakness of usual gauges like industrial production and fixed asset investment.
To assess the country’s economic condition as it shifts from an investment-led to a consumption-driven economy, China’s service sector should be viewed as closely as manufacturing, mining and construction.
The market needs to develop a new set of indicators to pay more attention to the growing services sector as it’s now more than 50 per cent of GDP. In addition, some of the trends we see here tell a very different story to China’s GDP deflator and PPI data.
In contrast to a downward trend in manufacturing, mining and resource sectors, consumer prices are relatively stable. In fact, certain services sector indicators have shown no signs of significant slowdown.
Many observers tend to assess China’s economic health by focusing on the industries with overcapacity. The reality is the consumer segment and services industries are growing at a fairly rapid pace. This includes movie box office sales – alongside catering, air passenger volume and e-commerce transactions.
This may be in part explained by China’s rising middle class which ANZ expects to more than double its spending by 2030, lifting China’s consumption as a portion of GDP to nearly 50 per cent, up from about 38 per cent in 2014.
Film buffs believe Star Wars, one of only 34 foreign films expected to be granted a release date in China this year, could make up to $US100m in China on its opening weekend. However, so far, the response has been lukewarm. Presale numbers are speculated to be around 2.2 million Yuan — about $AU470,000 — in tickets for the midnight premieres, and 8.7 million Yuan ($AU 1.85 million) for opening day, suggesting the movie’s record-breaking run may shortly come to a close, in China anyway.
This does not necessarily mean problems in the non-manufacturing sector. It would more likely reflect Chinese consumers’ relative unfamiliarity with the trilogy, as China’s total box office is expected to grow by more than 20 per cent this year.
The Jedi have a challenge ahead and may need to call for help from their US comrades The Avengers or Optimus Prime who have experienced success in capturing the hearts and minds of Chinese moviegoers.
For the economy as a whole however, queues outside movie theatres may yet be helping to offset the shrinking queues of ships waiting to unload bulk commodities for the industrial sector.
Li-Gang Liu is Chief Economist, Greater China at ANZ
