Flat year forecast for retailing

Growth in retail sales is expected to be flat this year at 13 percent, with most of the momentum coming from rising incomes and relaxed one-child policies, a retail industry report from a government think tank says.

China is unlikely to introduce broad consumption stimulus policies this year, says Zhao Ping, deputy director of the Chinese Academy of International Trade and Economic Cooperation, part of the Ministry of Commerce.

It is difficult to continue providing direct subsidies for consumption in view of slower tax revenue increases. Instead, growth in consumer goods sales will be mainly organic, Zhao says.

She says that consumers will spend more to improve their living standard as incomes rise. They will also increase consumption as a result of modifications to the one-child policy.

Last year, consumer spending that relied on public funds fell 10 percent, affecting the luxuries and gift markets. Sales of luxury watches and male apparel were hit the hardest.

Meanwhile, 70 percent of luxury shopping by Chinese residents was done overseas.

But Zhao says it is important to distinguish between high-end consumption and luxury spending with public money.

"They are related, but high-end spending is not all spending with public funds."

Luxury spending will be sluggish this year, although the sector still has huge potential in the long term, she says.

Luxury tobacco and alcohol products have been hit hard by the government austerity campaign, and their producers will find it challenging to recover this year.

Top Chinese liquor brands have cut prices to recapture market share among customers who are willing to spend 100 yuan ($16) to 300 yuan a bottle.

The situation in the catering industry is polarized. About 90 percent of high-end restaurants sales fell by an average of 50 percent last year. On the other hand, spending at restaurants that target the mass market grew more than 10 percent on average.

Spending on information services has become a highlight in retail spending, with the growth rate of online shopping exceeding 30 percent last year and shopping based on mobile devices expanding more than 50 percent.

The report also says that service consumption will grow based on product consumption.

Overall dependence on property and vehicle consumption for retail sales growth is weakening, the report says.

Food and beverage consumption is expected to retain the momentum that it had last year.

Zhao advises the government to stimulate consumer spending by focusing on urbanization. She also suggested an increase in imported products to meet domestic demand.

Imports of consumer goods rose 24.5 percent last year, 17.1 percentage points higher than in 2012.

wangzhuqiang@chinadaily.com.cn

(China Daily Africa Weekly 04/25/2014 page22)