China's retail sales surge 21.6% in May

China: an enormous consumer market

Still, economist David H. Wang told BloggingStocks Friday there's an upside and a downside to the robust retail environment in China.

"It's a great Chinese shopping extravaganza," Wang said. "Seriously, on the one hand there is the potential for a large expansion of the consumer market for western goods, which will increase developed world growth, if China continues to open its markets. Incomes are rising in China, and people with disposable income there are doing what they do elsewhere, which is buy goods and big-ticket items. That has the potential to be bullish for American companies, as well as help China in its goal to create more domestic economic activity and be less export revenue-oriented."

"On the other hand, there is the problem of domestic inflation and the strain on commodity prices and raw materials," Wang said. "Some would argue that this rate of consumption increase is still too high and I tend to agree. China is grappling with 'how do we continue to grow and increase incomes without taxing commodities beyond their ability fuel global growth?' Right now, the emphasis has to be on slowing inflation, which is running at about an 8% annual rate, which is way too high."

A partial solution, ironically, Wang said, would be the importation and wider distribution of more, low-cost foreign goods into China. That would slow domestic inflation, among other benefits, he said. To do that, China would need to let the yuan, currently at 6.9018 yuan to the dollar, appreciate more, something he expects the Chinese government to do later this year.