China investors should be "defensively positioned" as a decline in the nation's tax receipts suggests a steeper slowdown in spending than retail sales figures show, according to Goldman Sachs Group Inc, Bloomberg reported.
"Tax data show much sharper deceleration in income and consumption in the past few months than suggested by official retail sales or income growth figures," Goldman Sachs analysts Joshua Lu, Caroline Li and Fiona Lau wrote in a note today.
Value-added tax has "de-linked sharply" from retail sales figures, the analysts wrote. VAT rose 1 percent in the fourth quarter from a year earlier, while retail sales gained 21 percent, according to the note.
Growth in China's individual income-tax receipts "slowed down significantly" in the second half and shrank in December and January, the analysts wrote. This compares with nominal wage growth of 21 percent in the third quarter, the report said.
"We think the government's fiscal stimulus package announced so far may help create jobs, but may not necessarily help boost wages which, in our view, is the key driver of consumption growth," the note said. "As such we are not hopeful that China's consumption slowdown will bottom out soon."
Goldman Sachs's top China consumer stock recommendations are Want Want China Holdings Ltd., the country's largest rice cracker maker, Tsingtao Brewery Co., the biggest Chinese beer company by sales, and China Mengniu Dairy Co., the largest milk producer.