Urban spending drives China August retail sales

BEIJING, Sept 16 Reuters is reporting that China said on Monday that consumption in August was buoyed by brisk sales of cars and mobile phones and higher student spending as schools expanded enrollment, but not enough to meet the government's target.

The State Statistical Bureau said retail sales rose 8.8 percent in August on the year, as urban spending boosted the key consumuption gauge beyond the 8.6 percent rise of July.

But that still fell below the annual target of 10 percent -- a trend analysts expected to persist.

"I'm comfortable with that number because it's not falling. But it is still below the government target which shows some softness on the back of unemployment and worries over state enterprise reform," said Standard Chartered Bank economist Tai Hui. "That is going to continue for months ahead if not longer."

A bureau spokeswoman said retail sales growth was 8.6 percent between January and August compared with a year earlier, unchanged from the 8.6 percent growth in the first seven months.

August retail sales topped 314 billion yuan ($38 billion), the bureau said.

"The market for telecommunications tools, home electric appliances and automobiles remained active thanks to various kinds of promotion," the bureau said.

Sales in the catering industry soared 16.5 percent in August on the year while sales of foodstuffs rose 15.3 percent. Clothing sales climbed 15.2 percent in August on the year while "other sectors" edged up only 2.7 percent, it said without elaborating.

COUNTRYSIDE LAGS

Analysts said retail sales have suffered this year -- coming in only slightly higher than overall economic growth -- because many city dwellers fear losing their jobs as industries are overhauled in line with pledges to the World Trade Organisation.

Stagnating rural incomes have also hampered consumer spending in an otherwise booming economy, they said.

Urban sales climbed 9.9 percent in August to 201 billion yuan while rural sales rose 6.9 percent to 113 billion yuan.

Some 70 percent of Chinese live in the countryside, but their spending power has been hampered by slowing income growth due to weaker grain prices and the poor performance of township firms.

Growth in consumption has lagged other growth engines -- exports and investment -- which have risen this year on a global recovery and sustained state spending on infrastructure.

The government is targeting 10 percent retail sales growth in 2002 to help achieve seven percent annual economic growth, but analysts are sceptical sales will be that strong. Retail sales rose 10.1 percent in 2001.

But Liang Youcai, an economist at the State Information Centre, said the government should raise the incomes of poorer urban dwellers and cut taxes on farmers to help spur spending.

"Spending on cars by the urban middle-class is helping boost the overall consumption, but such spending seems unlikely to play a vital role," Liang said. ($1=8.276 Yuan)