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September 12, 2009

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Retail sales gain impetus

CHINA'S retail sales accelerated last month as government incentives to car buyers and other stimulus measures underpinned domestic consumption to act as a counterweight to slumping exports.

The sales grew 15.4 percent from a year ago to 1.01 trillion yuan (US$147.8 billion) last month, speeding from a 15.2 percent rise in July, the National Statistics Bureau said yesterday.

"Retail sales picked up on stimulus measures and registered growth better than our expectations," said Chen Lu, an analyst at Haitong Securities Co. "We estimated it would maintain the same pace as the previous month."

The government has provided incentives since the end of last year to encourage people to spend. Rebates are given to buyers of durable goods such as television sets, refrigerators and washing machines.

"An easing in deflation this month may further fuel domestic demand, which partly offsets the loss in exports and makes economic expansion sustainable," said Wang Qing, an economist at Morgan Stanley.

The Consumer Price Index last month fell 1.2 percent year on year. That followed a decline of 1.8 percent in July, signaling what some economists think may be the bottom of seven consecutive months of deflation.

Meanwhile, China's exports fell 23.4 percent on an annual basis to US$103.7 billion last month. Imports also tumbled 17 percent, deteriorating from a drop of 14.9 percent a month earlier.

"The uncertainties in the global economy still cloud the outlook for China's trade. So strong domestic demand is crucial to sustaining China's economy," Wang said.


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