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What the 'Transformers' movie says about China economy

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China's economy may be slowing but there's no "Age of Extinction" when it comes to the consumer story in the mainland, says Morgan Stanley, referring to the latest Transformers movie which has broken Chinese box office records since opening last Friday.

On its opening weekend, the film grossed over $96 million - accounting for one-third of the $301 million in global box office revenue.

The takeaway here is that growth in mass market consumer spending is proving resilient in the face of a property market slump, the bank said.

Read MoreAre China's property vacancies a danger sign?

The downturn in China's real estate market - which accounts for over 15 percent of economic output and supports some 40 other industries - has not been a major setback to consumer confidence thus far. The risk, however, is that a deeper slowdown could lead to negative wealth effects and hurt consumer spending.

"Continued rapid growth in China's consumer and services sectors is the key to ensuring overall resilience in the macro-economy in the face of property market weakness and a slowing in associated components of investment spending," Laura Wang and Jonathan Garner, strategists at Morgan Stanley, wrote in a report.

The Transformers series box office pays witness to how Chinese consumers' spending power has evolved over the past seven years, the bank pointed out.

When the first Transformers movie debuted in 2007, China contributed just 6 percent of its total global box office revenue. The contribution grew to 9 percent by the time the second film came out in 2009 and 16 percent when the third movie was released in 2011.

But China's movie box office receipts are just one key indicator of buoyant consumer spending amid a growth slowdown.

"Majority of household consumption (autos, air passengers, total retail sales, restaurant dining, Macau gaming mass market spending) have been growing at double- or close to double-digit rates, despite weak residential property sales data," Wang and Garner said.

Read MoreChina retail sales rise 12.5% in May, above expectations

E-commerce, meantime, grew 28 percent on year in the first quarter.

Extrapolating the resilience of Chinese consumers into an equity investment strategy, the bank recommends betting on companies in the consumer, IT and healthcare sectors as well as banks, insurance and energy firms.

Contact World Economy

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