"China is confronted with a slumping international economic situation this year, and the economic recession facing our major trade partners in the United State, Japan and the European Union leads to waning exports," said Li Rongrong, minister of the State Economic and Trade Commission, yesterday.

"For China to further boost consumer spending to reach this year's 7 percent economic growth target, we must cultivate a sound distribution sector," Li said.

The distribution sector refers to retail, wholesale and catering companies.

Li made the remarks at a two-day national working conference in Shanghai that concluded yesterday, at which government officials and industry leaders exchanged opinions and experience on how to bolster consumer spending.

"Though the distribution sector has grown strongly in recent years, it still only accounts for 9 percent of the country's gross domestic product, half the level of developed countries," said Li.

Retail sales last year rose 10.1 percent from a year earlier to 3.8 trillion yuan (US$453 billion).

Retail sales this year is expected to grow by 10 percent.

China has committed to gradually opening its retail, wholesale and service industries to foreign investors two to five years after joining the World Trade Organization.

"The majority of distribution enterprises are too small to contend with foreign rivals which boast abundant capital, sufficient management system and mature global procurement networks," said Li. "Sales of our top retailer last year were only equal to 1 percent of Wal-Mart's."

To strengthen local firms, Li said the government will push for the creation and growth of strong retail chains.

"We will encourage qualified chain stores to expand through mergers, asset restructuring, acquisitions and franchising," said the minister, adding that the government will help strong companies raise capital through stock listings or restructuring.

By 2005, the government hopes to see sales at domestic chain firms hit 700 billion yuan, with an annual growth rate of 35 percent. About 20 chain giants with annual sales exceeding 5 billion yuan each are expected to be formed.

The central government has planned several steps it will take to help chain companies prosper. For example, the Ministry of Culture and Press and Publication Administration will make it easier for chain firms to distribute books, newspapers and videotapes, while the Ministry of Finance works to reduce tax problems for chain companies.

The central government will also strive to improve the logistics industry, and develop e-commerce systems.

(eastday.com January 22, 2002)