China's consumer spending rose last year but not up to expectation, a top statistician said yesterday.

Retail sales rose 13.7 percent to 7.64 trillion yuan ($979.6 billion), National Bureau of Statistics (NBS) head Xie Fuzhan said at a press conference. But as the national economy's growth engine, domestic consumption needs to be boosted further.

"The domestic consumption market is growing at a brisk pace, and consumer spending is accelerating." But, Xie said, "as a big country, China has to base its economic development on domestic demand".

Last year's retail sales were 0.8 percentage points higher than 2005. In December, sales hit 749.9 billion yuan ($96.1 billion) last year, up 14.6 percent year on year.

But despite the robust economic growth, inflation remained subdued. China's consumer price index (CPI), a major inflation index, grew 1.5 percent in 2006, 0.3 percentage points less than the previous year.

The CPI rose to 2.8 percent in December mainly because of rising food prices. And Xie attributed the recent increase in food prices to tight domestic supply, inefficient circulation and a fall in global grain output last year.

"Combined with slowing producer and falling commodity prices, this implies that overall inflationary risk will remain low this year," HSBC's chief China economist Qu Hongbing said.

Rocketing automobile sales provide compelling evidence of the growing appetite of consumers in the country.

China has already overtaken Japan to become the world's second largest market for new vehicles, registering sales of 7.22 million units in 2006, up 25.13 percent over the previous year, according to China Association of Automobile Manufacturers. By the end of last year, only United States sold more vehicles than China.

The country has taken a lot of steps in recent years to increase domestic consumption in order to reduce its reliance on investment and export growth.

But on one hand, an incomplete social security system has prevented domestic consumers from loosening their purse strings. And on the other, strong external demand has led to a huge trade surplus, compared to which the growth of domestic consumption is still low.

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