Whither Chinese growth?

A lead story in today's FT sounds the alarm bells over China's steep drop in export figures in April:

The total value of Chinese exports fell 22.6 per cent from a year earlier in April to $91.9bn, a faster rate of decline than the 17.1 per cent year-on-year drop in March, which many analysts and officials took as a sign that external demand for Chinese goods was starting to recover.

Back in March I posted on a story coming out of Bloomberg, which raised the question of the importance behind China's plummeting export figures for the country's growth. Somewhat curiously, the piece concluded that exports are only marginally important, as China is a continental economy driven primarily by domestic investment and consumption. 

A great piece by James Kynge lends credence to the Bloomberg story. Kynge argues that growth in the Chinese Mainland - and rising domestic consumption - is now powering the economy:

Retail sales have held up much better in China this year than in other big economies, growing at a real 15.9 per cent in March 

year-on-year. But more important than the overall trend is the composition of the retail spending.

The most robust consumer spending figures are coming from inland and lower-tier cities rather than from the traditional growth powerhouses clustered around the Yangtze and Pearl river deltas. A China Confidential survey assessing consumer spending intentions among an estimated 64m middle and upper income households in 189 cities in March showed a much higher propensity to spend in lower-tier cities.

Overall, 51 per cent of respondents in 15 second-tier cities said they planned to increase spending this year from last – a full 9 percentage points more than the number from the first tier. In 170 third-tier cities, 49 per cent of respondents said they would boost their spending this year.

As Gideon Rachman observes, "if this is a real and sustainable change, it is critically important for the future of the world economy" -- and indubitably so for future analyses of China's economic progress. We'll see if the trend keeps up.