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Retail sales in Q1 jump by 15% as incomes rise

THE growth in China's retail sales in the first quarter is better than expected and the country should continue to stimulate demand and also use the financial crisis to improve its economic structure, economists said yesterday.

In the first quarter, retail sales jumped 15 percent to 2.94 trillion yuan (US$430 billion). Eliminating pricing factors, retail sales grew 15.9 percent in real terms, a rise of 3.6 percentage points from a year ago. It was 1.1 percentage points higher than the growth in all of last year.

Breaking the data down to month by month growth, the rise in retail sales waned from January's 18.5 percent to February's 15.2 percent and last month's 14.7 percent.

But the consumption is expected to maintain a strong growth, backed by an increase in residents' incomes and China's rising household savings, Li Xiaochao, a spokesman of the National Bureau of Statistics, said yesterday in Beijing.

Li gave an example of urban income increase of 11.2 percent and a climb in rural income of 8.6 percent in the first quarter as proof that retail growth can be sustained.

China's strong savings can also help to shore up demand potential as Chinese residents have money to spend unlike consumers in Western countries who depend on credit, he said.

"The retail sales figure is one of the indicators that has slightly exceeded expectations," said Daniel Melser, a Moody's economist. "Nevertheless growth is getting perilously low relative to the country's growth capacity and the expectations of the populace."

The central government has for years tried to improve its economic structure by trimming the reliance on exports and boosting domestic consumption.

Household savings rose to 24.3 trillion yuan by the end of the first quarter, indicating that Chinese consumers have the purchasing power but authorities have to find ways to ignite spending.

The central government has increased subsidies for farmers and low-income groups to improve the social welfare system to boost domestic consumption.

Retail sales in rural areas outpaced the pick-up in urban areas as the consumption growth in the former topped 17 percent in the first quarter, faster than the 14.1-percent expansion in the latter, the bureau disclosed yesterday.


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