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September 22, 2009

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Households plan to increase spending

CHINA'S massive economic stimulus package has triggered higher household spending plans, led by rural areas, an industry survey found.

About 41 percent of urban households and 59 percent of rural households said they intend to increase their spending in the next 12 months, MasterCard said yesterday, detailing the findings of a survey of 6,300 respondents in China from July to August.

"China's households, both urban and rural, are clearly responding to the government's policy initiatives aimed at reviving growth," said Yuwa Wong, an economic adviser with MasterCard Asia Pacific. "The massive increase in bank lending appears to have had the desired effect on employment and income creation, especially in rural areas."

Rural households appear more bullish than their urban ones, driven by expectations of an increase in income.

About 81 percent of rural respondents said they expect household income to rise. Other drivers of spending include optimism about the rural economy, and government policies implemented to encourage spending.

China is trying to stimulate consumer consumption to counter a slump in exports, the traditional growth engine.

To revive rural demand, the central government has offered subsidies on the purchases of home appliances and autos.

For urban households, consumer spending is driven by expectations of stable employment and anticipated increases in income.

China's economy grew 7.1 percent in the first half. Economists said they expect China to achieve its growth target of 8 percent for 2009.

MasterCard conducted the survey in the cities of Shanghai, Beijing and Guangzhou and in the provinces of Jiangsu, Shandong and Shaanxi.


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