China shoppers flush with ‘hidden income’

Bloomberg

Chinese consumers may have a lot more cash at their disposal than previously thought — and they’re ready to flash it.
That’s the upshot of two items throwing fresh light on the outlook for consumer spending, a key metric in China’s much-vaunted shift from an investment- and export-led economy to one more based on people buying things like holidays, clothing and cell-phones.
Official survey-based disposable income data could have underestimated citizens’ true spending power by as much as 20 percent, according to research by the government-backed Chinese Academy of Social Sciences in Beijing, That’s because the official sampling isn’t good enough
to reflect the affluence households have gained through investment returns, CASS says.
And households are the most optimistic they’ve been in more than two years, a private consumer confidence report showed.
“We’re richer than the data suggests, and the potential for spending is bigger than it looks,” said Zhao Wen, a labor economics analyst leading the research. “Consumption will continue to be an important driver for economic expansion in the future.”
The shift is reflected by the new champions of the nation’s economy: not industrial giants but retail and services innovators. Tencent Holdings Ltd and Alibaba Group Holding Ltd have become China’s largest corporations in the past year.
Consumption spending, including government outlays, accounted for more than three quarters of economic expansion in the first three months of 2017, as growth accelerated for the second straight quarter. The challenge for policy makers led by President Xi Jinping now is to keep disposable income rising — as they’ve pledged to do — even while they’re trying to deflate property-market bubbles and crimp the amount of leverage during the longer-term slowdown of the world’s second-largest economy.

Wage Growth
Success isn’t automatic. As China faces stiffer wage competition from its neighbors, wage growth is moderating. Growth of median per-capita disposable income decelerated to 6.7 percent in the first quarter, down from 8.3 percent last year and slower than GDP expansion for the first time since the National Bureau of Statistics began releasing a gauge covering both rural and urban households in March 2014.
The NBS pays a rotating sample of around 160,000 households across the nation to report their daily income and spending habits, generating quarterly data on how much they can spend. Yet persuading people to be honest about their wealth is no easy task, and it’s almost impossible to track how much people earn through investment of stocks and properties.