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Chinese consumer spending is in better shape than indicated by retail sales data, analysts say, in what could be a positive sign amid a disconcerting slowdown in the world's second-largest economy.
Retail sales growth may have faltered in 2018, but experts say that's only one piece of the puzzle in an increasingly complex consumer landscape.
China's retail sales figures are part of an eagerly-awaited set of monthly data that includes readings on industrial production and fixed asset investment.
In 2018, retail sales growth slowed to 6.9 percent after adjustment for inflation, hit hard by weak auto sales. That compared with an increase of about 9 percent the year before.
The problem is that investors pay too much attention to that metric, said Christopher Wood, equity strategist at financial firm CLSA, who added that that measure includes purchases of goods but hardly any services.
"Many investors are looking at the collapsing car sales in China and extrapolating that across all sectors," Wood told reporters on Jan. 28 in Hong Kong.
"While that's understandable from a sentiment standpoint, a broader measure of Chinese consumption just doesn't look that bad," he said, citing the consumption expenditure per capita index, which includes both goods and services.
Growth in that index accelerated last year to 6.2 percent compared to the 5.4 percent increase in 2017.
Services are an increasingly important part of the equation in China as consumers spend more on healthcare, leisure and travel.
"Given that services now account for over 50 percent of total consumption, slowing retail sales masked the solid growth in consumer spending on services," Tianjie He, senior economist at Oxford Economics, said in a January report.
He cited an increase in spending on healthcare by urban households last year to 15.1 percent from 9 percent in 2017, as an example.
"The fact that retail sales excluding cars (have) held up well and consumer confidence has also improved indicate that concerns about China's consumers are largely overdone," He wrote.
Authorities have for years aimed to shift China's economic model to one where expansion is slower but more sustainable. They have also geared the economy toward being driven by private consumption instead of state-led infrastructure investment and exports.
The transition has been seen as largely working and China is expected this year to overtake the United States — the world's largest economy — in total retail sales for the first time.
Frank Tsui, a fund manager at Hong Kong-based investor Value Partners, said the government largely focused on reducing debt in the financial system in the last two years and will be "keen to drive domestic consumption" this year.
"We actually think the health care sector is looking quite attractive at the moment," Tsui told CNBC on Jan. 23.
But not everyone is optimistic about consumer spending. Economists at Japanese financial firm Nomura cited high household debt and growing unemployment for its view that even stimulus in the form of individual income tax cuts won't help.
"We see no signs of a sustainable rebound in the near term and maintain our bearish outlook on consumption through 2019," they said in a report on Jan. 21.
Investors, however, say it's only natural that China will go through bumps amid its economic transformation, but no one should lose sight of the bigger picture.
"More than 60 percent of China's GDP is now basically value-added services and consumption," according to Gavin Parry, managing director of Hong Kong-based investment services firm Parry Global Group.
"So it's moving very much towards the American model," Parry told CNBC.