Retail spending in some durable goods remained strong as wealthy shoppers showed a voracious appetite for cars, still considered a luxury item in China, and furniture on the back of a private housing boom.

Analysts had expected retail sales to pale in comparison to strong export growth, given a natural lag in consumer demand.

"We expect retail sales will probably remain at this level for a while," said ABN AMRO Bank economist Marvin Wong.

"The pickup of the external side is clear. It will eventually spill over to the domestic economy," he said. Wong predicted that deflationary pressures would probably begin to lift and retail sales register stronger growth from the third quarter.

Pledges by the government to further raise salaries of civil servants later this year were also expected to boost consumer demand, analysts said.

The National Bureau of Statistics said retail sales grew 8.4 percent year on year in the first four months of 2002 compared to 10.1 percent growth registered for the whole of 2001.

China's economic data for the first four months released this week has reaffirmed the nation's status as one of the world's fastest growing economies.

Exports, a key pillar of growth, grew a better-than-expected 17.2 percent and industrial output rose 12.1 percent on the year in April, in line with the global economic recovery.

But consumer price data released on Thursday underscored deflationary pressures in the economy. China's benchmark consumer price index fell 1.3 percent on the year in April, its sharpest monthly fall in more than two years.

For those with the cash to spend, cars and furniture were in demand.

Cars sales jumped 38.8 percent in April from a year earlier. Furniture sales soared 37.8 percent on the year, figures showed.

Some analysts think deflation is being driven more by an oversupply of products across many industries stemming from duplicate projects pushed by local governments in the past and a subsequent downturn in the business cycle.

Retail sales in China's cities rose 9.4 percent year on year in April to 192.27 billion yuan (US$23 billion), far more than the 6.2 percent increase in rural areas, the bureau said.

Analysts said people were spending more in affluent cities like Beijing and Shanghai, but less in rural areas where around two thirds of the Chinese population is lagging in development and purchasing power.

The government has been trying hard to spur consumption as an engine of growth in the countryside.

(China Daily May 22, 2002)