China's retail sales climbed mildly in October, rising 14.2 percent year-on-year to 498.3 billion yuan (US$60.2 billion), the National Bureau of Statistics (NBS) revealed yesterday.

The growth rate compared to a 14 percent annualized increase of retail sales in September and 13 percent for the first three quarters.

Urban retail spending totaled 326.8 billion yuan (US$39.5 billion) in October, a 14.7 percent rise on a year-on-year basis, while retail spending in rural markets grew by 13 percent during the same period.

The growth of retail sales was stable and within expectations, said Chen Jijun, a senior analyst at CITIC Securities.

That is also a good sign for the healthy development of the economy, he said.

Compared to investment and exports, which have maintained strong growth in recent years, consumption also a major engine for the economy is still comparatively moderate in terms of its growth rate.

It is important for China to keep consumption strong as the growth in investment is expected to further slow down, Chen said.

Moreover, exports depend more on global demand and the global cycle, while the long-term sustainable growth of the domestic economy should absorb the energy being created by healthy domestic demand.

CITIC Securities expects retail sales to rise at a similar rate in the fourth quarter and possibly gather further momentum next year.

A major fluctuation of the figure is unlikely, said Chen.

According to NBS statistics, oil continued to be a major driving force behind consumption growth in October, as the demand and prices remained high.

Retail sales of oil and oil-based products in China recorded a 56 percent increase in October.

Consumption in the catering sector was up by 18.5 percent and food recorded a 17.8 percent rise in retail sales.

There was a downturn in the growth of sales for telecommunication products to the tune of 27.7 percent in October. They had registered growth of 45.2 percent in the first three quarters.

The seemingly robust consumption growth is based on rising prices and the actual growth looks to be tapering off, experts said.

China's consumer price index (CPI) grew by 4.3 percent in October, down from 5.2 percent in September.

Therefore, the actual growth of retail sales currently is still at around 8-10 percent, which is close to the growth rate of recent years, said Chen.

But it is generally expected that CPI, the inflationary barometer, will lose more strength this month and in December, as the government-led economic cooling-off measures further ease inflationary pressure.

A report recently released by the State Information Centre, a Beijing-based government think-tank, has predicted that the CPI growth for 2004 will be around 4 percent.

And retail sales are estimated to rise by 12.8 percent for the year, up by 3.7 percentage points from 2003.

But opinions are still divided on whether the government's macroeconomic controls are strong enough.

Since last year, the authorities have taken a series of measures to cool down the economy to create a soft landing, which included the tightening of credit supplies and interest rate hikes.

Consequently, the growth of both fixed investment and bank loans have eased.

(China Daily November 16, 2004)