Economy

Markets

Industries

Insights

Reports

Events

Consumer resilience

(China Daily)
Updated: 2009-06-15 18:25

The strong growth in retail sales shows that Chinese consumers may be more resilient than they thought themselves to be. Chinese policymakers should build on the momentum of consumption growth to improve the public's expectation.

China's domestic consumption accelerated in May as government stimulus measures spurred consumer spending. Retail sales rose 15.2 percent from a year earlier - 0.4 percentage points higher than in April. Though still much slower than the country's turbo-charged investment growth, a 15-percent increase in retail sales in the first five months of this year bears testimony to the growing potential of Chinese consumers as a key driving force of the economy.

For instance, vehicle sales have been surprisingly strong so far this year. It was reported that Beijing drivers, used to leaving showrooms with new cars the same day, now have to wait up to eight weeks for a new car of certain brands. Most carmakers failed to foresee a double-digit sales jump caused by an economic rebound, tax cuts and subsidies and are now trying to raise their output in a hurry. The China Passenger Car Association claimed that the country's automobile sales will "definitely break the 10-million-unit barrier" in 2009 and may even touch 11 million.

Related readings:  Retail sales, industrial output jump in May  China's retail sales up 15.2% in May  April retail sales slip 6.9% year-on-year  China retail sales up 14.8% in April

Clearly, few had expected China's domestic consumption to hold up so well amid the global recession. But it may be the Chinese consumers themselves who are most surprised by the ongoing consumption boom.

A second-quarter report by the People's Bank of China shows that a record high of 47 percent of urban residents - 9.5 percentage points higher than that in the first quarter - would like to save more. At the same time, a record low of 15.1 percent of them - 14.6 percentage points less than that in the previous quarter - prefer to consume more. Such changes indicate that uncertainty about future income growth has made urban residents more cautious about spending. Though urban residents' income has increased 9.3 percent in the first quarter, the central bank's survey projected a gloomier view among Chinese consumers of their present and future income.

The huge discrepancy between what Chinese consumers are actually doing and what they are thinking surely demands close attention from policymakers who are trying to boost consumption as a solid foundation for sustainable growth. If the public's worries about employment and income are not adequately addressed, the current consumption boom will be short-lived as more and more consumers choose to save more rather than spend more.

In spite of the global recession, Chinese consumers have demonstrated their eagerness to improve living standards. The release of the pent-up urge for purchasing new cars is evident in the increased retail sales. Chinese policymakers should waste no time in seizing upon this evidence of success to stimulate consumption of other items.