tics Office (NSO), so it’s wise not to get too excited about the retail sales numbers released on April 16, along with the customary spiel about the national economy and how competently it is being managed by the government. Officially then, China’s retail sales rose by 4.7 per cent in the first quarter, with consumer goods up 3.1 per cent and services up 10.0 per cent. Online sales grew at a significantly faster pace than offline sales, which is consistent with evidence coming from individual retailers like Walmart. The online share of total retail sales is now 23 per cent. With the Chinese New Year shifting to February 10 this year versus January 22 in 2023, it is useful to compare the aggregate January-February sales for the two years, numbers which were dutifully produced earlier by the NSO. These showed good growth of 5.5 per cent on top of 3.5 per cent last year, suggesting that the current retail recovery is no longer just attributable to a low bar set in the base year.  So far, so good, but why shouldn’t we put too much stock on these numbers? There are some reasons for optimism that the data is at least semi-reliable. Certainly there has been quite a lot of volatility in the retail sales numbers post-covid, indicating that the government tinkerers are not so busy as they once were trying to smooth them out. Lingering doubts Problems linger though. China’s economic statistics are subject to being cooked by the country’s statisticians, who from time to time for political reasons inflate the data gross domestic product (GDP) data. Since retail trade is a key input into broader consumer spending, which in turn is a massive component of GDP (as much as 45 per cent by some estimates), it stands to reason that the retail series might be a bit wonky too. That doesn’t matter too much if the wonkiness is consistent but in China’s case there have often been concerns that the amount of fiddling varies depending on political necessity.  Another reason to worry is that in a centrally-planned economy like China’s, production targets are set for provincial governments, which have strong incentives to meet or exceed those targets, resulting in inflated numbers. Cities and provinces have always been in a kind of competitive footrace on many levels, and economic performance is one of the most important. The central government is wide awake to this, of course, and has been increasingly proactive over time in removing incentives for local and provincial authorities to fabricate growth numbers, and generally policing them more closely.  Specifically in regard to retail, an ever larger share of spending has shifted over time to services, particularly food and beverage. Services is now believed to be accounting for as much as 40 per cent of all household spending in China, where aging demographics are edging consumer spending away from merchandize. But in the Chinese economy, where the informal sector plays such a huge role in this kind of activity, it is much harder for statistical authorities to count than spending on goods. This is, of course, a problem not limited to China but it is relevant across developing Asia as a whole. The government seems to be making a sincere attempt to tackle the problem and in August 2022 it launched a new data series for services that quantifies spending on items such as leisure activities, health care, business services, education, transport, accommodation and dining out. Sometimes though, the government in China simply doesn’t help itself when it comes to dispersing clouds that gather over the quality of its data. A notorious example is the abrupt cessation of reporting the youth unemployment data series in mid-2023: the plug was pulled on it after the rate had soared above 20 per cent. The series just as abruptly returned in January 2024, with the levels of unemployment a good deal lower than six months previously. Walmart as a bellwether To get a better grip on how things are traveling for China’s mid-market consumer it is useful to monitor Walmart, which operates about 400 stores in the country. In the most recently reported quarter (the fourth fiscal quarter of the year ending January 31), year-on-year sales grew by 11.3 per cent to US$4.0 billion, Same-store sales grew by 6.6 per cent. The company is reporting e-commerce penetration of a staggering 50 per cent, twice as high as the broader government retail sales figure. However, the growth trend is consistent.  Retail services are also feeding mall occupancy growth According to CBRE, food and beverage catering firms continue to account for more than 40 per cent of leasing activity in both Tier 1 and Tier 2 cities because of their superior ability to attract footfall in malls. This is expected to continue. CBRE’s market outlook, published in February, states that “demand from coffee and tea drinks and specialty food with highly standardized menu items [for new space in malls]” will drive a lot of leasing activity. The report cites huge store opening plans for Tims Coffee,  Chagee, Subway and KWAFOOD Fried Chuan, among others.  The economy is still warm but disinflation is hanging around The broader Chinese economy got off to a good start in 2024 if the official numbers are to be believed. GDP rose by 5.3 per cent in on a year-on-year basis in the first quarter. The Consumer Price Index was flat, so there are still strong disinflationary pressures about and retailers are struggling to raise prices. Indeed, the overall retail environment continues to be highly promotional.