It’s not just talk. China’s grand rebalancing of its economy away from manufacturing and towards services is finally having an impact.
And a positive one.
While wage growth in manufacturing is stagnating, improved education and and higher paying jobs are helping to ease the economic pain, according to a note from Goldman Sachs analysts led by Jashua Lu.
So while exports might be crashing, and state-owned industry is withering, a new type of Chinese consumer is stepping in to pick up the slack.
Here’s Goldman Sachs:
College graduates now account for 10% of China’s labour force, up from 3% 10 years ago, and the mix change can continue to drive income growth while export manufacturing jobs start to see slower wage growth.
And here’s the chart:
The change in the types of new jobs creating means that spending patterns are also changing. The new Chinese consumer wants to have fun with their friends and buy nice things on the internet.
Here’s Goldman Sachs again (emphasis ours):
“‘Having more fun’ as a desire maintained strong growth across datapoints we tracked: Pou Sheng (largest distributor of adidas and second largest distributor of Nike in China) saw cFX sales of 13% in Jan-Feb 16 maintaining its strong 4Q15 momentum. Additionally from Exhibit 8, e-commerce growth was still very resilient as express package delivery volume was up 50% yoy in Jan-Feb 16.”
Spending on restauarants and movies was up 17% and 60% respectively in the fourth quarter of 2015, according to the report. It’s also good for income tax receipts, which are growing at about 15% per year.
And package delivery growth for internet shopping is growing rapidly, at about 50% year-on-year: