The rise in retail sales figures of China in November 2007, despite the global economy slowdown, indicates the high potential of the country’s domestic economy.
The National Bureau of Statistics (NBS) reported on December 12, 2007 that after a gap of 11 years, China’s retail sales touched a new high in the month of November 2007. It was 18.8% above the corresponding month in 2006, as reported by Xinhuanet.
It broke its own previous record, which was set in January 1997. At that time, the retail sales increased by 19.8% from the same period a year earlier (January 1996). The sales figures in the month of November 2007 were also higher than 18.1% sales figures recorded in the month of October 2007, which also includes the holidays of “golden week” when people like to expense.
Stephen Green, a Senior Economist at Standard Chartered Bank (China) Ltd, said, “Today’s number signals that there is strong growth in household spending. This can help pick up some of the slack as export growth slows next year (2008)”, as reported by Shanghaidaily.
The experts believe that the growth in retail sales is the result of initiatives taken by the Chinese government, like reduction in taxes, rise in minimum wages, education promotion and improvement in welfare and healthcare sectors. The effects of these initiatives are evident on consumer spending and relieve the dependence on investment and exports. Experts also attributed the rise to soaring consumer prices and high consumer demand due to the festive season.
Undoubtedly, the rise in retail sales figures reflect China’s annual inflation rate. The inflation rate was running at around 6.9% in the month of November in 2007 - highest in the last 11 years.
Coupled with strong consumer spending, the industry experts also forecasted that the global economic retardation would have a positive effect on domestic economy because it would reduce the need for economic tightening in China.
According to a Senior Research Analyst at RNCOS, “China’s retail industry, particularly the domestic retail sales, is witnessing a tremendous increase. However, slowdown in exports could have a depressing effect on the retail industry because it hampers the national economic growth. To sustain the upward movement in the retail industry, China needs to pay attention to boost the domestic consumption and this is only possible when steps are taken to decrease the interest rate.”
Related Marekt Research Reports:
Middle East Retail Sector Analysis (2007-2010)
Poland Retail Analysis (2008-2012)
Vietnam Retail Analysis (2008-2012)
