文本描述
ECONOMICS ● CHINA
29 June 2018Resilient household consumption…
A tariff war with the US looms large. The two sides are ‘seeking to talk’ but nothing has been
scheduled. Investors are contemplating the possibility that, for the first time since the Smoot-Hawley
Tariff Act of the 1930s (which was between the US and other industrialised countries), punitive tariffs
will be applied, this time, on China-US trade. Sentiment has undoubtedly been hit. And given the
heated rhetoric, more near-term risks to trade cannot be ruled out.
How would China’s economy fare in such a scenario We have recently lowered our 2018-19 GDP
growth forecasts by 0.1ppt to 6.6% and 6.8%, down from 6.7% and 6.9%, respectively (see Global
Economic Quarterly, 28 June). However, beyond the near-term impact, we think growth will be
steady. For three reasons: 1) China’s heavy rebalancing toward domestic growth drivers, such as
consumption and services, will help shield a large part of its economy, 2) the manufacturing sector
will be supported by the large domestic market and SOE-focused deleveraging, and 3) China will
actively diversify trade and investment relationships to offset slower bilateral trade with the US.
In Chart 1 below we look at China’s real GDP growth by expenditure. It shows that final
External headwinds vs
domestic tailwinds
China’s economy has already rebalanced significantly toward
consumption and the services sector
The large domestic market is set to support the manufacturing
sector, while deleveraging will focus on SOEs
Tariffs and investment restrictions may hurt bilateral trade, but the
impact can be partly offset by more trade with other countries
Chart 1. China has rebalanced heavily toward consumption
Source: CEIC, HSBC
-5.0
-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
11.0
13.0
15.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Q1
2018
Real GDP growth, ppt contribution
Final Consumption ExpenditureGross Capital FormationNet Export of Goods and ServiceECONOMICS ● CHINA
29 June 2018
consumption, which includes household and government consumption, accounted for 56% of
China’s growth between 2013 and 2017. Consumption accounted for 59% of growth (4.1ppt out
of 6.9ppt) in 2017 and 78% in 1Q18 (5.3ppt out of 6.8ppt). Investment accounted for 2.1ppt and trade
accounted for -0.6ppt in 1Q18. In nominal terms (Chart 2), consumption was smaller and investment
larger, but consumption is still over 50%. Net exports, in nominal terms, was around 2% in 2017 and
should be close to zero so far in 2018, given the change in China’s terms of trade.
…supported by income growth and households’ balance sheet
Over the next 1-2 years, we expect consumption growth to remain stable to support overall economic
growth. We believe there are two pillars of consumption growth: one is income growth and the other
one is households’ balance sheet.
As shown in Chart 3, household income has a strong correlation with GDP growth in China,
suggesting a tight relationship between labour market conditions and the state of the overall
economy. After a cyclical slowdown in 2015 and 2016, growth has recovered. Alongside that, labour
market conditions had started to stabilise in 2016 (urban migration had picked up pace), and nominal
wage growth had picked up to 10% y-o-y in 2017. Would a tariff war derail the labour market
recovery We think there might be some near-term disruptions, but the overall impact should be
Chart 2. Net exports are only 2% of nominal GDP now
Source: CEIC, HSBC
Chart 3. Labour market has turned around,
alongside growth
Chart 4. Impact of a tariff war will likely be
limited
Source: CEIC, HSBCSource: CEIC, HSBC
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8442322322
43464848474747454444
131313131313131414151030
40
50
60
70
80
90
100
2008200920102011201220132014201520162017
% GDP
Consumption: HHNet exportsGCFConsumption: Govt51525
30
35
40
1993199720012005200920132017
YoY%
nominal GDP growth
Average Wage: Urban Non-private (China)20
40
60
80
100
200120032005200720092011201320152017
% of national employment
PrimarySecondary: Industrial
Secondary : OthersTertiary
ECONOMICS ● CHINA
29 June 2018more tolerable. In Chart 4, we look at China’s labour market composition. The services sector is the
largest employer, accounting for 45% of total employment (349 million out of 776 million). The
primary sector employs another 209 million, or approximately 27% of total employment. Within
the rest, approximately 218 million are employed by the secondary sector, and around 88
million are employed by the industrial sector. Figuring out how many jobs are directly related to
exports is difficult, although we can use the share of exports in industrial sales as a proxy
(around 10%). And, given our estimation that the first round of a tariff war (if it involves USD50
billion worth of goods) will reduce exports by 0.6%, it would suggest around 0.1% of the labour
market could be impacted. This is far less than the impact of capacity cuts in the steel and coal
sectors as a result of the three-year supply-side reform agenda (which will be drawing to an end
next year). And, given the fast growth in other parts of the manufacturing sector, as well as
China’s services sector, this is an impact that we believe the labour market can digest.
In addition to wage growth, Chinese households’ balance sheet is another pillar of support for
consumption. While the household saving rate has remained relatively stable, there are
increasingly signs that households will be more willing to access the emerging consumer credit
market, partly as the market infrastructure continues to improve. As shown in Chart 5, alongside
a general pick-up in mortgage-related household debt in recent years, short-term consumption
debt growth has generally been growing at a faster pace over the past 1-2 years. As a result,
short-term consumption loans as a share of overall household debt have increased to 17.4% in
Chart 5. Households have begun to access
consumer loan market
Chart 6. Balance sheet is still health
overall
Source: CEIC, HSBCSource: CEIC, HSBC
Chart 7. Housing market fluctuations vs
household consumption
Chart 8. Consumer confidence
Source: CEIC, HSBCSource: CEIC, HSBC
01020
251030
40
50
2015201620172018
% share
Th
ous
and
s
RMBtrn
Short term consumption loan
HHdebt: all else
Short term consumer loan % total HH debt (RHS)20
40
60
80
100
200520072009201120132015
Th
ou
sa
nd
s
RMBtrn
Household Financial Asset and Liability: Net Asset
Household Financial Asset and Liability: Asset
Household Financial Asset and Liability: Liability
-40
-2020
40
60
80
100
20032005200720092011201320152017
% YoY
Household Consumption growth
Floor space sold
30
40
50
60
70
200220042006200820102012201420162018
PBoC's Urban Depositor Confidence Survey
Current Income Sentiment
Future Income Confidence
Future Employment Expectation。。。