Westpac MNI China Consumer Sentiment Survey May 2015

The Westpac MNI China Consumer Sentiment Indicator, hereafter the Westpac MNI China CSI, was unchanged at 111.1 in May, which is 8.4% lower than a year ago and 8.7% below the long run average. The absolute level of the CSI indicates that Chinese consumers are still anxious about their personal financial wellbeing and the economy more broadly, despite the major shift in the policy stance since late last year. Note that the 100bp cut in the required reserve ratio (April 20) is fully captured by this survey, whereas the 25bp lending rate cut announced on May 10 came at the end of our sampling period and is thus only partially reflected in these results.


Three of the five components that go into the calculation of the Westpac MNI China CSI decreased from their April levels. The major negative impulse came through in expected business conditions, while expected family finances and ‘time to buy a major household item’ improved. Current business conditions (not part of the composite, but closely correlated with the PMIs and IP) moved lower, consistent with the weak data flow of late.

The May headline result was biased lower by a dramatic shift towards pessimism among the 55-64 age group (~15% of the sample). Excluding this cohort, the Westpac MNI China CSI increased by 1.9pts from 111.8 in April to 113.8 in May. It is encouraging that the younger cohorts that are most active in the twin processes of household formation and durables accumulation, and are thus more likely to take advantage of policy incentives, are more optimistic than their elders.

Investment preferences tilted further in the risk-seeking direction in May. Both domestic real estate and, naturally, the booming share market, attracted a greater share of adherents. The scale of these gains is still relatively modest though, implying there remains plenty of room for a rebalancing of portfolios towards these asset classes. Other aspects of the survey indicate that the equity boom is not yet having a major impact on the conservative financial mind-set of the ordinary Chinese citizen. The rate of saving out of income is still well above average and the proportion of income used for active investment is still well below average.

The employment indicator declined by a cumulative 11.3% between May and October 2014 and has since gained just 2.0%. The latest reading is 9.2% below long run average. Ergo, in absolute terms job security remains in short supply. This possibly explains why despite this year’s generous minimum wage increase, low income respondents are relatively less optimistic than their higher earning counterparts.

The consumers’ attitude towards real estate improved on a broad front in May, following on from the modest cumulative improvement in Nov-Apr. The four major indicators, namely house price expectations; ‘good time to buy a house’; and the relevant components of ‘wisest place for savings’ and ‘motivation for saving’ all improved. This is the definitively positive directional reading on housing that we had hoped for in April. We argued then that perhaps it would be a case of delayed gratification. Count us as relieved.

Huw McKay Senior international economist, +61 (2) 8254 9338

Past performance is not a reliable indicator of future performance. The forecasts given above are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The results ultimately achieved may differ substantially from these forecasts.