Consumer resilience

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.