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November 17, 2009

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Home » Business » Economy

Consumer spending helps boost city growth

SHANGHAI'S economy made further progress last month as a result of continued strong growth in local consumer spending and investment, while exports also improved to help strengthen a growing recovery.

The city's retail sales gained 14.1 percent year on year to 46 billion yuan (US$6.7 billion) last month, staying in line with growth in the previous two months, the Shanghai Statistics Bureau said yesterday.

Consumer spending was lifted by car sales that soared 20.9 percent from a year earlier, thanks to government subsidies for energy-efficient vehicles.

Urban fixed-asset investment in the city expanded 13.9 percent on an annual basis to 425.7 billion yuan in the first 10 months, cooling a bit from the jump of 14.1 percent in the first three quarters after China ordered a contraction of excess production capacity.

Foreign direct investment grew 4.8 percent to US$890 million last month, indicating renewed confidence in Shanghai by overseas investors.

Export drop slows

Exports, the weak link in Shanghai's economy, declined 10.7 percent last month from a year earlier to US$13.3 billion. But it was the smallest drop so far this year and compared with a retreat of 16.3 percent in September.

"It is hard to predict when the city's overseas sales can return to former prosperity due to escalating trade frictions, despite better global economic conditions," said Xue Jun, an analyst at CITIC Securities Co.

Declines in imports widened last month to 9.2 percent from September's 3.4 percent due to smaller purchases of raw materials on the global market after the order to control overcapacity.

"Shanghai is well on track to sustain its recovery, despite the blow from declining exports that may continue for awhile," said Li Maoyu, an analyst at Changjiang Securities Co.

Disney's promise

"It is important for Shanghai to upgrade its industrial structure, move toward a service-led economy and provide more value-added goods to stimulate consumption," Li said.

He said Shanghai has huge potential for further development, boosted by the World Expo next year and a planned Disneyland in the Pudong New Area scheduled to open in five to six years.

Shanghai's consumer prices continued to dip in October, helping to sustain the country's relaxed monetary policy.

The Consumer Price Index, the main gauge of inflation or deflation, fell an annualized 0.3 percent last month, easing from a decrease of 0.5 percent in September.

The city's gross domestic product increased 9.8 percent year on year in the third quarter, according to earlier reports.


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