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A new growth engine

(China Daily)
Updated: 2008-11-13 16:15

Though the ongoing global financial crisis and economic slowdown have hit Chinese exporters hard, China's retail sales shrugged off the increasingly gloomy growth prospect to increase rapidly.

Latest statistics show that the country's retail spending rose 22 percent in October from a year earlier.

With such strong consumer spending, it looks more likely now that China can manage to maintain sound economic growth in spite of the impact global recession exerts on its export sector.

And that should add to the confidence of Chinese policymakers who have just launched a huge fiscal stimulus package to prevent a sharp overall downturn.

It is true that the country's retail spending, just over 1 trillion yuan ($146 billion) in October, remains relatively small as a share of the Chinese economy, the world's fourth largest one. And the October retail growth rate is also a little bit down from September's 23.2 percent.

Yet, the fact that last month was still one of the strongest months on record shows the tremendous potential of the domestic market. Policymakers should seize the opportunity to develop consumer spending as a mainstay of China's sound and fast economic expansion.

With a population of 1.3 billion who, as a whole, are getting richer year by year, the country's urbanization and industrialization drive will surely open a very big market not only for domestic enterprises but also for foreign investors.

The surge of foreign direct investment China has absorbed so far this year bears full testimony to the attractiveness of and foreign investors' confidence in the Chinese economy.

In the past 10 months, the amount of foreign capital China has actually utilized soared by more than one third to $81.1 billion. That would be remarkable even in years when the world economy does well. The current poor performance of advanced economies and dimmer global growth outlook only make such increased inflow of foreign capital to China even more impressive.

Some people may argue that the number of foreign-funded companies approved by the government has dropped by 26 percent between January and October over the same period last year, indicating less overseas interest in expanding their business in China.

The severe situation of the world economy has indeed made it more difficult for foreign investors to expand in overseas markets. But the potential of the Chinese market is as evident as strong consumer spending is.

The urgent task is to render it into a desired growth engine for China's sustained development.