China's retail sales will continue to grow at a fast rate over the next few years, thanks to the government's emphasis on stimulating consumer demand.

Huang Hai, Assistant Minister of Commerce, said the nation's retail sales, an important indicator of consumption demand, is projected to grow at an average annual rate of more than 11 percent during the 11th Five-Year Guideline (2006-10) period.

"By 2010, China's retail sales will cross the 10 trillion yuan (US$1.2 trillion) mark," Huang said at the China Retailing Summit held in Shanghai yesterday.

Earlier figures from the National Bureau of Statistics indicate that China's retail sales rose 12.9 percent year-on-year to 6.7 trillion yuan (US$828.3 billion) last year.

Such a strong growth, fuelled mainly by rising household incomes and more stable consumer prices, is just what the government wants to see, said Qi Jingmei, a senior economist with the State Information Center.

"The current economy relies too much on fixed asset investment, which has resulted in both overcapacity and trade friction," she said.

In developed countries such as the US, consumption usually accounts for 70 to 80 percent of the gross domestic product (GDP), but it accounted for just 33.3 percent of China's GDP last year.

The government wants to let consumption play a more important role in its future economic growth, Qi said.

Finance Minister Jin Renqing said late last year that the country's fiscal policy will help boost consumption demand during the Guideline period.

Such fiscal measures will include an increased spending in the fields of education, health care and social security, he said.

Zhuang Jian, a senior economist with the Asian Development Bank's Resident Mission in China, said Jin's pledge is good news for both urban and rural residents.

"With less financial burden, people will be more willing to spend," he said.

The government has already taken a series of other measures to adjust the relationship between investment and consumption, Zhuang said.

As of January 1 this year, the government raised the threshold on personal income tax from 800 yuan (US$99) to 1,600 yuan (US$197), which should increase their spending capacity.

The government also abolished agriculture tax, and made compulsory primary school education free in rural areas to help ease the financial burdens of rural residents.

(China Daily February 13, 2006)