Market’s Bet on the Chinese Consumer Whiffs in 2021

There was near universal consensus in 2020 that China’s post-Covid recovery would normalize beyond the industrial sectors in 2021, punctuated by a strong rebound in consumer spending. China Beige Book data repeatedly showed a struggling retail sector, however, and no prospect of a consumption boom. When official retail sales data soon fizzled out, markets panicked.


At the onset of China’s mid-2020 Covid reopening, there was little disagreement that the country’s recovery was overwhelmingly driven by industry, with the retail and services sectors lagging. Yet for many it was an article of faith that this imbalance would not last.

Wall Street Outlook

Predictions were rife by late 2020 that consumer spending would soon catch up to industrial sector growth in 2021, as the recovery normalized. Sell side analysts were especially encouraged by the rapid rebound in retail spending figures. Their models failed to account for the fact that China had boosted these figures through large-scale revisions to its 2019 statistical baselines, turning an otherwise full-year contraction to expansion.

CBB Forecast

China Beige Book data told a very different story. Deeming this “Another False Retail Dawn,” we dismissed the notion that a consumer boom was imminent. Our data into mid-2021 showed sharply decelerating retail revenue and profits, weakening sales price gains, and the lowest level of retail borrowing in CBB history. CBB data were clear: this was not an industry gearing up for a bounce back in the second half of 2021.

Source: CBB Data Platform


By August 2021 China’s retail spending growth had fallen for five consecutive months, pouring cold water on predictions of a heated consumer sector. When the consumer-spending surge never materialized in government statistics either, market sentiment flipped.

This consensus would lead China analysts to next predict a reversion to big push, but that forecast also ended in failure. To read how we also correctly forecasted China’s monetary policy in 2021 read, Correctly Predicting China’s 2021 Monetary Policy.

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