Research & Insight

China is the biggest retail market in Asia (ex-Japan) and the fourth largest globally (the same size as the United Kingdom). Rapid GDP growth, the rise of the middle-class and disposable income has kept China the fastest growing consumer market in the world.

I spent the last two and a half weeks travelling in China, meeting with companies, government think-tanks, officials and ordinary citizens. Although the economic picture is rapidly changing due to accelerated deterioration of the external environment from overseas, my general sense about the place is that consumers are still holding up relatively well. The hardest hit sectors are export and property and its supply chain (construction, steel and cement). A number of measures, both monetary and fiscal, have been announced by the government in recent weeks to minimise the impact of the external shock. The key focus of these measures is to stimulate domestic consumption and to invest in infrastructure. Some of my observations and thoughts are summarised below.

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With all the preoccupation with market volatility and sub-prime security induced crises, it is perhaps appropriate to adopt the “house style” contrarian approach and to look through these heightened market uncertainties at some more or less constants, however uncertain those constants may actually prove to be! In the context of the Republic of Korea (RoK), such constants have included regulation, corruption and governance, and last but by no means least, the Democratic People’s Republic of Korea (DPRK). On the northern half of the divided peninsula, the mortgage and credit markets may not be the most developed, and arguably may not even be a twinkle in the Dear Leader’s eye, but scope for collateral damage remains undiminished.