Retail sales on the up as incomes rise
By Su Bei (China Daily)
Updated: 2005-11-15 06:40

China's retail sales rose by 12.8 per cent in October compared to the same month last year, accelerating slightly from the 12.7 per cent growth in September.

Retail sales, an important indicator of the country's consumption demand, reached 584.7 billion yuan (US$72.1 billion) last month, the National Bureau of Statistics said yesterday.

Qi Jingmei, a senior economist with the State Information Centre, said the strong retail sales situation was in line with the country's economic development.

China's gross domestic product, which grew by 9.4 per cent during the first three quarters of this year, is driven by both brisk domestic and external demand, she said.

Retail sales would continue to grow at no less than 12.5 per cent in November and December, she added.

Zhuang Jian, a senior economist with the Asian Development Bank's mission in China, said rising household incomes, coupled with stable consumer prices, had boosted retail sales.

Per capita disposable income for urban residents rose by 9.8 per cent in real terms to 7,902 yuan (US$974) during the first three quarters of this year. Per capita net income for rural residents rose by 11.9 per cent to 2,450 yuan (US$302) in the same period.

The consumer price index, a key inflation measure, rose by 1.9 per cent during the January-October period.

"Retail sales are capable of maintaining double digit growth this year," said Zhuang.

The Ministry of Commerce earlier said China's retail sales are expected to rise by 12.7 per cent this year, following last year's 13.3 per cent growth.

The Chinese Government has taken a raft of measures, including cutting taxes, increasing subsidies for rural people and raising incomes for the urban poor, to boost domestic demand.

It has also taken macro-control measures, such as land-supply limits and credit curbs, to rein in over-investment in sectors such as cement and steel. The government fears weak demand allied to fast fixed asset investment growth will result in a production oversupply.

However, Zhuang said stimulating consumption is a troublesome issue, and is not as easy to control as fixed asset investment.

Retail sales are linked to people's consumption behaviour, the government's consumption policies and an improvement of the country's social security system, he said.

"What the government can do at the moment is to improve the market environment and to remove people's worries about the future."

Market potential in rural areas is very big, Zhuang added, but there are a lot of uncertainties.

"If rural people's incomes grow slowly they will be unable to increase spending," he said.

The relatively backward infrastructure in rural areas also restricts consumption.

The government should increase investment in the vast rural areas, he added.

(China Daily 11/15/2005 page10)