China cannot expect a higher growth rate in retail sales because a number of demand-stimulating consumption policies for large "items" - such as housing and cars - have yet to be worked out, senior economist warned. The government needs to take further measures to increase residents' income to stimulate this market, expert said.
Hu Shaowei, a senior economist with the State Information Center, said: "The country's retail sales will rise about 10 per cent this year."
The growth of China's retail sales will be stable and the disparity between urban and rural markets will continue this year, said Hu.
High Prices and Extra Financial Pressure
However, present policies have not only resulted in high prices but also added extra financial pressure for consumers after they bought such products, according to Hu.
Gap Between the Rich and the Poor
The vast majority of rural residents, two-thirds of the country's population, do not have enough money to buy goods because of the slow progress of urbanization and the slow shift of rural labor to the cities, said Zhang Xueying, another senior economist with the center.
The increasing gap between the rich and the poor has also had a negative effect on the consumer goods market, Zhang said.
According to investigations by the National Bureau of Statistics, the Gini Index - an international measure used for income distribution - stands at 0.458 in China. This is above the international warning line of 0.4, indicating that Chinese society suffers from income distribution inequity.
Traditional Idea Instead Consumption Credit
Ni Hongri, a senior researcher with the Development Research Center under the State Council, said the traditional idea of earning money before spending it also limits people's consumption enthusiasm.
"Chinese people do not traditionally use consumption credit," Ni said.
Other Factors
Other factors, such as irrational supply and people's reluctance to spend due to the slight possibility of inflation, also holds back the consumer goods market from developing faster, Hu said.
Policy to Improve Consumption Environment
The government needs to take further measures to increase residents' income to stimulate this market, he said.
Hu highly praised the "fees-for-tax" reform this year, which aims to increase rural residents' income.
He said the government should be able to improve the consumption environment for rural population.
Policy to Improve Backward Infrastructure
The backward infrastructure, high prices for electricity and low-quality telecommunication facilities in the rural areas have also limited rural people's consumption.
The government should try to make clear to the public that the current reforms covering housing, medical, the pension system and education system will be beneficial to them, and, in turn, give them confidence in the future, Hu said.
Policy to Offer More Credit
The government should also encourage consumption by urging banks to offer more credit, especially for purchasing cars and housing, he said.
China is scheduled to release its 2001 retail sales figures after Spring Festival, which falls on February 12. The State Development Planning Commission estimates retail sales rose 10 per cent last year from 3.42 trillion yuan (US$413 billion) in 2000.
( February 4, 2002)
