By  on February 8, 2017

SHANGHAI — The Year of the Rooster seems to be off to a solid start.Retail sales in Mainland China during the Lunar New Year period rose 11.4 percent on the year to 840 billion yuan, or $122 billion at current exchange, according to the Ministry of Commerce. The holiday ran Jan. 27 to Feb. 2. Sales growth was in line with the 11.2 percent jump seen in 2016 over 2015. It also came close to meeting Fung Global Retail's forecast for 12 percent growth.Anhui, Yunnan, and Guangxi, all Western provinces filled with lower-tier cities, recorded the fastest growth in consumer spending, according to the ministry’s data, whereas Shanghai’s retail sales rose 10.6 percent on last year.On Tuesday, Hong Kong-based jewelry giant Chow Tai Fook reported lukewarm Chinese New Year numbers with nearly flat same-store sales in Mainland China. Meanwhile, Cartier China said it was expecting sales to break records over the holiday period. Transactions at home and abroad by UnionPay cards rose 48.1 percent to 462 billion yuan, or $67.17 billion, during the seven-day holiday, according to data from the financial services company. Dining, shopping, traveling and transportation were the biggest categories for spending. Cardholders made 343 million transactions during the holiday, registering an 11.7 percent annual increase.Additionally, this year, more UnionPay card users were able to pay with their smartphones and the volume of transactions through the operator's contactless payment service increased nearly 21-fold year on year, with the under 300 yuan ($43.61) password-free payment increasing a 165-times year on year.Travel during the National Holiday is increasingly popular. Data from the China National Tourism Administration showed that 344 million trips were made throughout the festival, up 13.8 percent on last year, with 6.15 million trips being abroad, an increase of 7 percent. Cross-border transactions through UnionPay cards grew by 40 percent year on year, particularly in Asia-Pacific, Europe and North America.Meanwhile, the demand for higher-priced premium products in China seems to be picking up steam, according to a new study from Nielsen. The global market research company defines premium products as those that cost at least 20 percent more than the average price point of their respective category.According to the firm’s findings, 65 percent of online survey respondents in China will try a new and innovative premium product based on the recommendations of friends and family, and 60 percent said they are very willing to pay for premium products that have high quality and safety standards, with environmental factors being very persuasive. More than half of respondents claimed that they were willing to pay a premium for products made with organic and all-natural ingredients or environmentally friendly or sustainable materials.The Nielsen survey also indicated that clothing has upgrade potential in China, with 38 percent of respondents saying they are willing to pay for a premium offering, however, this fell short of the 39 percent global average. Cosmetics, on the other hand, showed stronger upgrade potential in the country, with 38 percent of Chinese respondents claiming they were willing to pay a premium, compared to the 33 percent globally, offering significant opportunity for brands in this category. Fifty-six percent of Chinese consumers said that they have spent more money on clothing over the past five years, which was the highest growth category after groceries.“With increasing affluence, consumers are craving products that offer an enhanced, premium experience,” said Vishal Bali, managing director of Nielsen China, in a note.Mark Tanner, founder and managing director of marketing, research and online agency China Skinny, detected an uptick in Chinese demand for higher-end apparel.“From 2013, there has been a trend away from high-end fashion to more value-focused, affordable apparel, particularly with the anticorruption campaign. Fast fashion was growing significantly faster than higher end. It seems like the last six-months of 2016 saw a notable preference back to the luxury end of the market, with most well-marketed luxury brands (finally) exhibiting strong growth,” he said.Still, broader concerns about the Chinese economy linger. Last week, the Caixin manufacturing purchasing managers index dropped in January to 51 from 51.9 the previous month, which was the highest reading in almost four years. A reading of more than 50 still shows growth, but the slight contraction signals that growth is at a slower rate. The official manufacturing purchasing managers' index, which rates larger companies, came in at 51.3 in January, also lower than the 51.4 reading for December.The service sector expanded at a gentler rate last month, with the Caixin China General Services PMI falling to 53.1 points in January, after a 17-month high of 53.4 for the previous month.On top of concerns that these contractions could impede economic growth, there are also fears that retail sales may slow.“Looking ahead, I would say that slowing wage growth will dampen down the rise in retail sales later this year,” said Jonathan Fenby, author and China chairman at TS Lombard Research Group.

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