Retail sales, a driving force for the country's economic growth, stood at 420.9 billion yuan (US$50.7 billion) for the month, the bureau said.

Economist Qi Jingmei at the State Information Center said July's retail growth was encouraging, because the government tried to promote consumption, while at the same time trying to cool down investment.

The healthy retail trend is closely related to income increases for rural and urban residents, she said.

Rural residents' per capita cash income rose a year-on-year 16.1 percent to 1,345 yuan (US$162) during the first half of this year, while urban residents' per capita disposable income rose 11.9 percent to 4,815 yuan (US$580).

"With more money in hand, people are willing to spend to improve their lives," Qi said.

Sales of automobiles grew 9 percent in July compared with a year ago, while sales of petroleum products jumped 50.2 percent, the statistics bureau said. Sales of telecommunications equipment jumped 41.3 percent, while sales of food, drink and cigarettes grew 20.4 percent.

Zhu Jianfang, an economist at China Securities, said China's retail market would continue to pick up in the coming months, as people's expectations for the future are still optimistic.

According to a survey by global payments company MasterCard International, Chinese consumers are very optimistic about employment, the economy, incomes, the stock market and quality of life over the next six months.

The government also has further plans to increase incomes for rural residents, as well as low and medium-income urban residents, Qi said.

"Development of rural markets is far from satisfactory, although the government has taken a series of measures to fuel the development of agriculture and the rural areas," she said.

Retail sales in the rural areas rose a year-on-year 10.7 percent in July. But the growth rate was 3.8 percentage points lower than that in the urban areas.

Fan Gang, director of the National Economic Research Institute, said the increasing income gap between rural and urban areas, as well as that between the poor and the rich, had a negative impact on China's retail market expansion.

But if the country's retail sales grow more than 10 percent, it would be good enough to sustain economic development, he said.

Yuwa Hedrick-Wong, an economic advisor of MasterCard International's Asia-Pacific region, said the Chinese economy would continue to develop steadily in the coming months.

The growth in China's economy is expected to reduce from 11 percent to 9 percent, shifting from acceleration to cruising, he said.

Statistics bureau spokesman Zheng Jingping said earlier that the overall performance of China's economy was good.

(China Daily August 14, 2004)