Retail sales in the first quarter of this year rose by 12.2 per cent year-on-year after adjustments for inflation, Huang Hai, assistant minister of commerce, revealed in Beijing yesterday.

Qi Jingmei, a senior economist with the State Information Centre, said the figure was better than expected.

Huang revealed the growth rate at a press conference, but did not give the nominal figure, which includes inflation.

This will be provided by the National Bureau of Statistics, which is scheduled to release first quarter economic indicators on Thursday.

The bureau's earlier figures show retail sales, an important indicator of the country's gross domestic product, rose a nominal 12.5 per cent during the first two months compared with the same period a year ago.

"It is quite a fast growth rate," Qi said.

She added that this suggests people's willingness to buy more, supported by rising incomes.

"Faster retail sales growth is what the government wants to see because it wants to depend less on investment and exports to drive future economic growth."

Partly due to strong retail sales, the country's gross domestic product rose 10.2 per cent year-on-year during the first quarter of this year.

Zhuang Jian, a senior economist with the Asian Development Bank's Resident Mission in China, said China is capable of maintaining this level of retail sales growth through 2006, thanks to the government's increasing emphasis on stimulating consumption.

The government has already raised the threshold on personal income tax from 800 yuan (US$100) to 1,600 yuan (US$200) from the beginning of this year.

This will allow people to keep more of what they earn.

The government has also repealed agriculture taxes and made compulsory school education free in the countryside, measures aimed at helping farmers.

But Zhuang said the government should not expect too much from consumption because it is hard to control individual behaviour.

"What the government can do is to make its residents feel safe to spend," he said.

People have chosen to save instead of spend mainly because of the incomplete social security system, he said.

The government should take measures to accelerate reforms in these areas, he said.

It should also try to create a good market environment, he added.

According to earlier figures from the commerce ministry, China's retail sales are expected to rise by about 13 per cent this year.

During the 11th Five-Year Plan (2006-10) period, the nation's retail sales are expected to grow at an average annual rate of more than 11 per cent.

By 2010, the country should be spending more than 10 trillion yuan (US$1.25 trillion) a year.

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