Wang Wei

I. General Features for the Development of China’s Consumer Goods Market in 2003

China’s consumer goods market experienced a test of severe acute respiratory syndrome (SARS) in 2003, and the market operation restrained first and rose later. It generally maintained a fast development momentum. The total retail sale of consumer goods reached 4,110.63 billion yuan in January-November 2003, up 8.9 percent year-on-year with the growth rate roughly the same as that in 2002.

1. Consumer goods market operation restrained first and rose late.

In view of the operation of the consumer goods market in the whole year of 2003, the growth rate presented a V-shape development (showing in the following chart) because of the impact of SARS epidemic. The growth rate of the total retail sale of consumer goods continued to fall to the lowest point of 4.3 percent by the end of May setting a record low over the past decade. However, it climbed up quickly from the all-time low in June to 10 percent increase in the rest of 2003, 0.82 percentage points higher than that of the same period of the previous year. The data showed that consumer goods market in 2003 still kept a strong increase power.

The operational situation of consumer goods market in 2003 is as follows:

2. Recovery trend of market prices

The trend of prices in the whole of 2003 operated at a low level in the middle of the year and then went up fast later. The consumer price index of residents (CPI) was up 1.3 percent year-on-year. The price pick-up had the following characteristics: (1) The price pick-up was universal. The consumer price index of residents in 31 provinces, autonomous regions and municipalities went up, except Tianjin, of which CPI was down 0.3 percent. (2) Prices in rural areas were up higher than in urban areas. The consumer prices of residents in rural areas went up 2.4 percent in the January-November 2003, 0.9 percentage points more than that in urban areas. (3) The hike of prices for food became the main force to push up the consumer prices of residents. Prices for farm products rose sharply and fluctuated quickly in 2003 greatly affecting prices for food. The prices in the first 11 months of 2003 was up three percent year-on-year ranking the top among the eight classified indexes of residential consumer prices by changing the pattern that the hike of service prices had pushed up the general level of prices.

3. Improvement in the contradictions of the consumer goods market

Under the situation of the expansion of marketization and intensified market competition, the restructure of market-oriented consumer goods market generated initial results. The structural contradictions of the consumer goods market were further alleviated in 2003.

(1) The situation of the consumer goods market has improved. According to a survey on the supply of 600 kinds of goods in the consumer goods market by the All-China Commercial Information Center, goods, of which supply met demand, accounted for 14.5 percent of the total in the first half of the year and 21.2 percent in the second half of the year, up 2.5 percentage points and 9.2 percentage points respectively over 2002. Goods, of which supply exceeded demand in the second half of 2003, reached 78.8 percent, down 6.7 percent from the first half of 2003 and 9.2 percent from 2002. There was no commodity item, of which supply fell short of demand, in commodity market in 2003.

(2) The tendency of the expansion of the gap between urban and rural markets was further alleviated. The urban consumer goods market continued to increase in 2003 with the retail sales reaching 2,676.72 billion yuan in the first 11 months of 2003, up 10.1 percent year-on-year and the growth rate was the same as in the year-earlier period. However, the development of the rural consumer goods market lagged behind that of urban consumer goods market with the retail sales on the consumer goods markets at and under county level up less than seven percent. The gap between urban and rural consumer goods markets was 3.1 percentage points, the same as in the year-earlier period.

(3) The development disparity of different industries shrank. Wholesale trade and catering service were still the leading force on consumer goods market with the contribution rate accounting for 82.3 percent and 13.1 percent respectively of the total increases on the market. In view of the situation of increase, the retail sales of wholesale trade and catering service in the first 11 months of 2003 was up 9.1 percent and 11 percent year-on-year respectively. The gap of the development of the two services was only 1.9 percentage points, 5.4 percentage points less than that in 2002. The two industries developed steadily.

4. Income level of urban and rural people continued to rise and consumers’ confidence was out of the low point

Under the situation of sustained and fast national economic growth, the state issued a series of policies to raise the income level of urban and rural people in 2003. They were to increase the wage level of government agencies and institutions, reduce farmers’ burdens and pay the defaulted wages of farmer workers. As a result, the income level of urban and rural residents went up. The disposable income of urban residents nationwide in the first three quarters of 2003 averaged 6,346 yuan, up nine percent on a year-by-year basis; and the cash income of farmers during this period was 1,801 yuan per capita on average, up four percent.

Influenced by the SARS epidemic, the confidence index of consumers declined rapidly to 85.7 percent in May 2003, a drop of 12 percentage points from the earlier period of the year setting an all-time low. It was picked up and increased to 94 percent in the second half of the year with the rise of the income and the improvement of consumption environment. The expectation index of consumers recovered to 93.5 percent in December 2003 indicating the stability of consumers’ expectation, which was in favor of the steady expansion of consumption.

5. Upgrade consumption structure and develop new fields for consumption

China’s per capita GDP reached 1,000 US dollars in 2003, and the consumption structure of urban and rural residents began to enter a crucial period of fast change upgrading from consumption structure to a number of new fields of consumption thus leading the development of the consumer goods market in 2003. First of all, the fast increase of the sales of commercial housing led to the boom of furniture market. Statistics on above-norm wholesale and retail enterprises nationwide show that the sales of building and decorative materials in the January-November 2003 was up 46.6 percent on a year-by-year basis, those of furniture up 47.2 percent, and those of household electric appliances and audiovisual equipment up 17.1 percent. Secondly, consumption of motor vehicles continued to rise quickly with the sales of family cars up 77.5 percent in the first 11 months of 2003, and the sales of oil and oil products up 36.4 percent. Thirdly, telecommunications, recreation, healthcare and commodities for holidays and festivals registered big increases. The sales of telecommunication equipment were up 74 percent, sports and recreational articles up 23.3 percent, cosmetics up 18.7 percent, and gold, silver and jewelry up 7.8 percent.

The upgrading of consumption structure not only helped boost commodity sales, but also facilitated trade in services for urban and rural residents. In view of consumption of tourism and recreation, China received a total of 89.99 million tourists during the National Day holidays starting from October 1, an increase of 11.5 percent year-on-year, and gained a total of 34.6 billion yuan, up 13.1 percent. Both the figures of tourists and tourist income set a record high. In the aspect of telecommunication consumption, the national telecommunication traffic in the first eight months of 2003 was valued at over 454.8 billion yuan, up 27.7 percent year-on-year, the fixed telephone users increased 30.70 million, and that of mobile telephone users was up 38.11 million. In the field of insurance consumption, the national premium income totaled 265.4 billion yuan, up about 32 percent.

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