China's distribution industry will continue its rapid growth due to its increasing role in the market and rural reform, according to the latest report on the development of China's distribution industry.

The distribution industry encompasses retail, distribution, logistics, catering and community services and involves the process of delivering goods and services.

The report, released jointly by the Ministry of Commerce and the Development Research Centre of the State Council on Friday, predicts that retail sales of consumer goods will exceed 7.5 trillion yuan (US$937.5 billion) in 2006, an increase of 13 per cent.

Sales of production materials are set to top 15.5 trillion yuan (US$1.93 trillion), up 12 per cent on 2005.

Consumption is likely to play a bigger role in the country's economy as the central government places greater emphasis on domestic demand to ensure economic growth, said Fang Aiqing, director of the commerce ministry's Department of Market Operation Regulation.

"We believe consumption will be better balanced with investment and foreign trade," he said.

The government also aims to establish a comprehensive distribution network in rural China in coming years, including retail chain stores, the wholesale market and the logistical organization of farm products.

As China's distribution market opens up, foreign investors are increasingly seeking to get into the market, the report said.

China has lifted all restrictions on regions, quantity and share ratio for foreign enterprises since December 2004.

The report said China's distribution industry has enjoyed high-speed growth in the past five years; in 2005 it was double the size of the 2000 market.

Retail sales of consumer goods grew over 12 per cent year-on-year in 2005 to reach 6.7 trillion yuan (US $837.5 billion). Sales of production materials increased by 16.2 per cent year-on-year to 14.3 trillion yuan (US$1.79 trillion).

The distribution industry provided 5.6 million jobs in China last year.

The industry is also a major source of tax revenue. The value-added taxes, business taxes and enterprise income taxes of the whole industry totalled 357.8 billion yuan (US$44.7 billion) last year, up 17.7 per cent from 2004.

The report also highlighted problems in the rural distribution market such as lack of government investment in the rural market infrastructure compared with other developing countries, many consumer goods retailers operating on a small scale, as well as problems with counterfeit products.

(China Daily 04/01/2006 page5)

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