China’s Growth in Retail Sales Lead to Economic Boom

The performance of China’s retail sector has been highly impressive and is catching the attention of foreign players eager to cash in on the booming economy.

IHT news reported that according to the National Bureau Statistics of China, the overall retail sales from January to June 2007 is at US$ 556 Billion, marking an increase of 15.4% from 2006.

The news on IHT mentioned Bank of East Asia’s Chief Economist, Paul Tang, saying that "Retail demand is growing and retailers are responding to the Chinese government's 11th five-year plan to bolster consumer demand. The overall economy growth is also quite good, and it all helps to increase consumer confidence”.

The soaring employment in the country since early 2007 is the reason for the rapid increase in consumer spending. It is facilitating household spending as well as enabling the retail sector to continue growing at the fastest rate.

Another reason for the burgeoning growth in China’s retail sales is the Foreign Direct Investment (FDI) in the retailing and the higher GDP growth. The country’s demographics is transforming with a major chunk of its population made up of under-14 years old, increasing number of working women, and the changing lifestyles.

The Chinese retail industry’s spectacular growth has caught the attention of Wal-Mart, the global leader in retailing, leading to immediate disclosure of its plans to establish more than twice the number of stores in the country in the next five years (from 2007 to 2012). Consumer demand and the impressive growth of the retail sector have prompted the Government of China to plan a hike in the interest rate on goods.

In a research by Credit Suisse, the international financial services group, China is expected to nearly triple its share of global consumer spending to over 14% by 2015 after 5.4% in 2006, leaving behind the likes of Germany, Britain and Japan in consumer spending share.

The RNCOS research analyst says, “The Chinese retail sales are accelerating at very high speed and the consumer demand comes as a delight to Chinese retailers. Even foreign investors are becoming more interested in the retail market in China, which will lead to further boost to retail sales. Economists are also convinced of China’s economy that is prospering due to growth in every sector of the economy, which will help in the Chinese consumer to spend even more in future”.

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