China’s stock market turmoil will not lead to Chinese households tightening their purse strings, the executive chairman of Zhongmin Baihui Retail Group told CNBC.
"The luxury segment may take a dent, but in general, the impact should be negligible, especially in the fast-moving consumer goods (FMCG) space," said Lee Swee Keng, a Singaporean who heads the retail company, which runs 12 shopping malls in the southern Chinese province of Fujian.
A rise in stock prices usually boosts the wealth of investors and the improved sense of financial security tends to bump up consumption, commonly defined by economists as the "wealth effect." This increase in spending theoretically results in higher incomes and profits which in a virtuous cycle eventually supports economic growth. But the tumble in mainland equity markets last month raised fears that the opposite may occur and complicate China’s transition from an economy anchored on exports and investment to one driven by the consumer.
(Source: CNBC)