"Investors who've been betting on a consumption miracle in China are going to feel a bit disappointed after the latest raft of earnings and revenue figures from some of the world's biggest brands. Nike and Apple are both reporting falling sales in China. For some companies like Adidas, things are a little bit better. Samsonite which makes luxury luggage told us yesterday that their sales in China are growing 8 percent, which sounds pretty good but compares to a 20 percent growth in the whole of 2012. So what's happening? Well we've been looking at retail sales across a range of different categories and it looks like purchases of almost everything are slowing - in some cases growing around half as fast as they were a year ago. So it looks like China's consumer is far from ready to prop up GDP growth for the time being."


"Now not all retailers are going to be equally depressed by the numbers that they're seeing in China at the moment. Some categories are racing ahead, notably jewelry. On a national level, sales of gold and silver jewelry are up more than 40 percent year on year. That's probably unsustainable and it may have something to do with consumers trying to park their money in something they think is going to retain its value, especially while the property markets are on hold. But broadly what we're seeing is that China's growth is slowing. That's probably because wages are slowing as the government tries to rein in investment and tries to curb some of the excesses we've seen in the economy over the past 3 or 4 years."


It will be particularly interesting to look at how some of the luxury goods companies are faring. Some of them have over-expanded dramatically in China but others seem to be doing okay. Tiffany, which of course makes very expensive gold and silver ware, said that its sales in China were especially strong so they're clearly benefitting from the rush to hard assets that can be easily spirited out of the country in an emergency. But we'll be looking particularly at the Guccis, the Pradas to see if their sales are also starting to suffer in the way that Samsonite's are. Broadly speaking, we're still very positive on Chinese consumption. In the long term, consumption has to rise from its very low 35 percent share of GDP. But what the current numbers are telling us that this is going to take a long time. It's going to be a difficult task. And for the short term, if investment is slowing, then consumer activity is unfortunately going to slow too."


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