Despite concerns about the Euro zone, the Chinese economy has offered two positive messages in the last month. The Purchasing Managers Index (PMI) continued to rise, up at 51.2% from 50.9% the previous month. Any figure above 50% is good and a rising figure is most encouraging.
Secondly, retail sales grew a remarkable 17.7% after 17% in August. With China’s GDP growing at nine percent, this means internal consumption is obviously taking a higher proportion of the economy and is exactly what many commentators have been seeking to happen. While the ‘And Finally’ section of the OATS Bulletin is intended to offer funny, quirky items, the stories about China’s high-spending property owners and young supercar drivers have some serious consumer messages behind them.
Against these elements, anecdotal reports are suggesting that life is not easy for all businesses. Infrastructure expenditure is weakening, so there are fewer major projects being undertaken. Inflation at 9% (or more, depending on which figures one believes) is beginning to bite.
The 110th Canton Fair, which opened on Friday, has seen both overseas buyers and Chinese exporters reluctant to confirm long-term orders, according to an MOC spokesman. The slowly rising Yuan Renminbi is squeezing exporters as one would expect during industrialization: people get richer, wages rise and so do costs. Eventually, either industrial activity has to move to a lower cost area, migrating inland from the Chinese coastal regions, or change to higher value-added activity.
Overall, it would seem that the much-predicted “soft-landing” will be achieved, rather than the feared “recession”. Like all re-balancing, it is never easy. While the US and Europe are faltering, the rest of the world must hope that China’s move toward internal consumption continues to make satisfactory progress.
Meanwhile, in the auto sector, VW is set to overtake Toyota and GM as the world’s largest car manufacturer, a most improbable outcome considering their position in 2008. A key aspect of this has been the growth in China. As I have noted in previous Bulletins, the continued progress in building the latest generation cars in China will push forward the adoption of the better quality lubricants, as consumers seek to protect their new vehicles. Local Lubricants manufacturers will need to “raise their game” or lose out to the higher priced, higher quality manufacturers.
Finally, OATS’ Beijing-based team has completed our database coverage of Chinese cars and we are now developing similar data for the commercial vehicle market. With added resource we're building the depth of market knowledge required to create and maintain Mandarin-based web solutions for both B2C and B2B applications.
For further information, or to comment on anything you have read or would like to contribute to the OATS China Bulletin, please contact Diana Shen at dshen@oats.co.uk.
Sebastian Crawshaw, Chairman OATS
STOP PRESS: In the latest news from Europe, the UEIL has reached agreement with EU Commissioners to exempt CN 3811 lubricant additives from the ECMS and tax regulations.