China retail sales rose at the fastest pace in 17
months in May, the government said Tuesday, as increasing incomes spurred
spending on cars, furniture and electronics.
Sales jumped 14.2 percent to 617.6 billion yuan, or $77.1 billion, after
climbing 13.6 percent in April, the National Bureau of Statistics said.
Prime Minister Wen Jiabao has cut taxes, raised minimum wages and pledged to
improve health care and welfare to support consumption and make the economy less
dependent on investment. Stronger consumer spending could give the central bank
more leeway to raise lending rates again as it seeks to curb investment.
"This indicates that the central bank can afford to take more measures to
tighten monetary policy, because consumption is now more providing more support
to the economy," said Jun Ma, an economist at Deutsche Bank.
The central bank, while raising its benchmark lending rate by 0.27 percentage
point to 5.85 percent on April 28 to cool lending for investment projects, kept
the official deposit rate unchanged, to discourage savings.
Per-capita disposable incomes in towns and cities increased 10.8 percent in
the first quarter, while rural incomes jumped 11.5 percent. China's economy grew
10.3 percent in the first quarter.
Adjusting for the impact of the Lunar New Year holidays, May's gain was the
biggest since December 2004.
Spending on furniture surged 40.1 percent after climbing 15.7 percent in
April. Sales of electronics increased 26.6 percent, up from April's 17.6 percent
gain, and vehicle sales jumped 29.4 percent after rising 26.3 percent the month
before.
Ikea, the world's largest home-furnishings retailer, plans to open two to
three stores in China each year during the next 10 years, the company's chief
executive, Anders Dahlvig told reporters earlier this month. The company already
has three outlets there.
China is trying to reduce a record by stimulating consumer spending and
imports rather than by allowing its currency to appreciate at a faster pace.
The yuan has climbed just 1.2 percent since July, when China revalued it by
2.1 percent and let it trade against a basket of currencies.
China had a record $13 billion trade surplus in May after exports jumped 25.1
percent, a government report said Monday.
Efforts by the government to curtail piracy may encourage more overseas
companies to expand in the nation, bolstering consumer spending, economists
said.
European luxury goods makers of brands including Chanel, Gucci and Louis
Vuitton signed an agreement last week with Beijing retailers to stop the sale of
counterfeit bags and clothing in malls.
Concern that patents won't be protected makes some
overseas companies reluctant to sell their most profitable products in China and
raises costs for those that try, according to McKinsey.
A Beijing court on June 2 backed Pfizer's
patent for the impotence drug Viagra, a ruling that lawyers said would encourage
pharmaceutical companies to expand in China.
Rising health care costs and a lack of adequate social security has made
consumers, especially in rural areas, cautious about spending. Retail sales in
urban areas made up two-thirds of the total in May and rose 15 percent,
outpacing a 12.6 percent gain in the countryside, today's report showed. Cities
are home to about 40 percent of China's population.
China's savings rate has been at almost 40 percent of
gross domestic product during the past two decades and stands at more than 45
percent now, the UBS economist Jonathan Anderson said in a June 6 note to
clients. Average incomes in urban areas are about triple those in the
countryside.
