A Cause For Celebration

Chinese consumers spent an estimated $50 billion last week during the nation’s third and final ‘Golden Week’ holiday of 2007.

If the China Ministry of Commerce figures are accurate, this amounts to every one of its 1.3 billion citizens spending US$4 each – a seemingly modest amount over a seven day holiday.

Yet, the compound impact of so many people is having a strong positive impact on China’s economy.

That is if we are to believe that stock markets increase to reflect and predict the natural growth of an economy – if so then expectations are levels of consumption will continue to gather pace in China after the Shanghai bourse reached a new all time high yesterday.

The benchmark Shanghai Composite Index closed yesterday at 5,692.76 – and has now increased a staggering 112.8% since over the first nine months of 2007.

This increase has been driven by a mixture of capital growth, speculation and new listings.

The appetite of Chinese companies to raise capital through initial public offerings (IPOs) appears to be insatiable.

According to Thomson Financial, in September alone Chinese firms raised US$34.6 billion through IPOs in Shanghai and Shenzhen and US$12.4 billion via listings in Hong Kong.

Capital raisings meanwhile are not limited to the mainland and Hong Kong.

In the US, 16 Chinese companies have launched IPOs in 2007, raising more than US$3 billion in the process, with three more in the pipeline for this year.

Meanwhile back onto the issue of holiday spending, and the reason the Beijing Government introduced three separate week long national holidays back in 1999 was to encourage consumption and boost the domestic tourism market.

The three festivals are:

The Spring Festival (or Chinese Lunar New Year) Golden Week – in January or February.

The Labour Day Golden Week – begins on May 1.

The National Day Golden Week – begins on October 1.

It seems there is a lot to celebrate at the moment in China