Why China is in for a challenging 2017

Written by Eileen Cassidy, CNN Whilst there are a multitude of factors that fuel shifting retail trends in emerging markets, a drastic slowdown in global trade during the holiday season is contributing to rapid…

Why China is in for a challenging 2017

Written by Eileen Cassidy, CNN

Whilst there are a multitude of factors that fuel shifting retail trends in emerging markets, a drastic slowdown in global trade during the holiday season is contributing to rapid changes in consumer behavior, analyst Ed Jones, an analyst at British financial advisory group Hiscox , told CNN.

Over the past 12 months, China’s retail trade has dropped by 6.8%, a drop that has not been seen in a decade. Jones noted that 18 out of the 22 largest economies to enter the global economy this century are currently experiencing slower growth.

In late 2016, India’s gross domestic product increased by 7.3%, but just weeks later, it plunged to 5.7%. “A strong manufacturing and services manufacturing economy will generally outperform a lower-weighted manufacturing economy, but we are seeing this with slower growth in manufacturing in India in late 2016,” Jones said.

In 2016, shipments from India and China both dropped 1.5%, recording their first decline in three years. Meanwhile, China’s exports jumped 18% in the third quarter compared to the same period last year, a sign that domestic consumption in the world’s largest market is the driving force behind the nation’s massive economic growth, despite the trade slowdown.

In a desperate move to stem losses, the Chinese government has not only taken steps to improve economic policy, but also to appeal to consumers’ views and preferences.

One such measure involves offering tax-deductible spending on furniture and new carpeting, Jones said. It is an “intelligent mechanism for stabilizing consumer demand,” he added.

These changes in strategy are helping Prime Minister Li Keqiang lead China toward a more consumer-focused economy, “promoting domestic consumption as the core driver of the economy and growth,” Jones said.

China is one of the world’s largest textile and clothing exporters, helping to fuel global growth, but the global market for apparel and textiles is “essentially stagnating,” Jones added.

In China, consumers are buying more online than at physical stores. In the first three quarters of 2016, online spending in China increased by 47% year-on-year to surpass $400 billion, according to research by the consultancy Bain & Company.

According to Jones, traditional retailers in the west will have to be “more creative and flexible” in order to achieve their respective goals.

“There will be opportunities for traditional retailers, such as brand owners and department stores, but they will have to transform their thinking and adapt in the New Year,” he said.

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