Rural setback?

The spending potential of more than 700 million rural people, about 55 percent of China's population, should not be underestimated, says Tang. "Rural demand is still key to China's long term economic future."

The average per capita net income of Chinese rural residents reached 4,761 yuan last year, a real annual growth of 8 percent.

That was down from 9.5 percent in 2007, when farm produce prices ran high, but still higher than the annual rates of 2004, 2005 and 2006.

Retail sales in towns and villages outpaced urban growth for the first time in November, rising 20.9 percent year-on-year to 210 billion yuan, according to the National Bureau of Statistics. That was 0.6 percentage points faster than the rate in cities.

However, the growing trend would suffer a setback this year as more labor-intensive enterprises fell victim to the economic downturn, says Wen Tiejun.

He says it's still too early to say if the economic slump will go so deep as to reduce the average net income of rural families.

Chinese farmers have experienced two periods of continuous earning decreases since the market-oriented reforms were launched 30 years ago. The first came as a result of runaway inflation in late 1980s and the second was due to the Asian Financial Crisis in 1997.

The first decline lasted three years and the second four years, and both were caused by sharply lower demand for farm produce, says Wen.

"This time, the non-farming revenues are affected and the crisis is global," he says. "What we face now could be more serious."

Long way to go

China's rural consumption has been accelerating since 2003, but still lags behind urban growth, even during the good times.

In 2007, retail sales of consumer goods in the country's counties, towns and villages rose 15.8 percent to 2.88 trillion yuan, 1.4 percentage points lower than in the cities.

National economic output grew 13 percent that year, the highest annual rate since 1994. It slowed to 9 percent in 2008.

Many companies were too reliant on exports and neglected the rural market, says Tang.

He wants manufacturers to adjust product design to rural demand and expand maintenance networks in the countryside.

Chen must do his sums before he spends.

When times were good, he would send almost half his wages, about 10,000 yuan a year, back to his wife, child and parents, who subsist off just 3 mu -- a fifth of a hectare -- of farmland, he says.

A majority of the remittance was saved for Chen's old age, as China's pension insurance system does not allow fully transferring pension funds between provinces.

That left Chen with just enough to pay his rent and basic living costs.

He had wanted to buy some "big items" -- better home appliances or furniture for this year's Spring Festival -- but found he could just afford new clothes for his child.

China rolled out a nationwide scheme on Sunday to offer farmers a 13-percent rebate on home appliances such as color TVs, refrigerators, mobile phones and washing machines.

The government's efforts will be hampered further by an inevitable economic trend toward less labor-dependent capital and technology-intensive industries, says Wen.

"That is the key problem," he says, noting the most effective solution is to sharply increase rural subsidies and investment.

The government spent 595.6 billion yuan in boosting rural development and incomes in 2008, up 37.9 percent from 2007, but Wen says there remains "a large scope" considering the proportion of rural population.