China's retail sales rose 10.5 percent in the first two months of this year compared with a year ago, as consumers increased spending on larger items such as mobile phones and cars.

The country's retail sales stood at 878.1 billion yuan (US$105.8 billion) during those two months, the National Bureau of Statistics announced in a statement Monday.

Car sales were up 60 percent in those two months compared with a year earlier, while petroleum sales jumped 41.2 percent, the bureau said.

Sales of telecommunications equipment, a category that includes mobile phones, rose 61.3 percent.

Cars, petroleum and telecoms gear account for just 6.5 percent of total sales, but they contribute 23.4 percent to sales growth.

"They are the driving forces behind market growth," the bureau said.

Zhu Jianfang, an economist at China Securities, said the higher retail growth figure in the two-month period suggests the country's retail sales market has begun to pick up gradually.

"This trend will continue in the coming months, as people's expectations for the future are still optimistic," he said.

A recent survey by the People's Bank of China suggests that 26.3 percent of urban residents who own individual accounts in banks said they believe their income will grow this year, while only 8.5 percent of them believe their income will be reduced.

More than 10 percent of urban residents are planning to buy private cars in the second quarter, while 21.4 percent of them plan to buy private homes.

Rural residents also have confidence in the future, as the central government has pledged to increase their income by implementing a variety of different measures, Zhu said.

The country's retail sales is likely to grow 11 percent for this year, he said.

Qi Jingmei, a senior economist with the State Information Center, agreed with Zhu, adding improvement in retail sales can only be gradual. "Consumption should play a bigger role in driving the country's economic growth," she said.

Last year, retail sales grew a year-on-year 9.1 percent, while the country's gross domestic product also grew 9.1 percent.

Commissioner Li Deshui of the National Bureau of Statistics said earlier that he was confident that the economy would grow by more than 7 percent this year.

The micro base for the current economic development has been improving, as entrepreneurs and consumers have shown increased confidence for the future, he said.

The formation of the Pearl River Delta, Yangtze River Delta and Bohai economic zone, the revival of the old industrial base in Northeast China, and the further development of the high-tech industry and service sector will all inject new enthusiasm into future economic development, he said.

(China Daily March 16, 2004)