The increase in China's retail sales volume exceeded 20 percent year on year in the last eight months and is still accelerating, enough to sustain economic growth above 9.5 percent for the rest of the year, a HSBC report said.
According to the report "China Economic Spotlight" released on Tuesday, consumer spending has performed strongly despite the slowing economy, the disastrous earthquake and the cancellation of the May Day golden week.
Taking into account the retail price index, the real retail sales growth hit a decade record of 15.4 percent year on year (to about 100 billion U.S. dollars) in July from 14.8 percent in June, substantially higher than the monthly average of 12.4 percent in 2007.
Both urban and rural areas showed strong retail sales growth in real terms over the same period last year, with rural retail up 14percent to 280 billion yuan and that of urban areas up 17 percent to 600 billion yuan.
Strong consumer spending is attributable to the rapidly increasing expenditure on accommodation and catering, up 26.5 percent year on year in July, and the robust growth of wholesale and retail trading, said the report.
In terms of commodities, petroleum products, jewellery, cosmetics, garments and automobiles are taking the lead. Petroleum products sales rose 55.2 percent year on year in July from 44.4 percent in the first half, reflecting the still strong demand despite the fuel price rise in June.
However, as a side effect of a less vibrant property market, the growth of building material sales fell further to -3.4 percent in July from the -1.8 percent in Jan-Jun period, a sharp decline from the 41 percent growth in the first half of 2007.
The report attributed the vibrant spending to the strong income growth of the past few years and the structural upgrading of spending on consumer goods.
In real terms, urban disposable income growth has maintained 10percent growth annually in the last three years, while rural residents' net income is increasing even faster. From January to June, urban per capita disposable income rose by 6.3 percent, while rural incomes increased 10.3 percent.
With nearly 1,900 US dollars per annum of disposable income for the urban residents and almost 700 US dollars per annum cash income for farmers, Chinese people are upgrading their consumption structure, said the report. They spend more on recreational goods, dine out more frequently, buy cars and go on more holidays, hence the fast rising sales of automobiles, garments, cosmetics and jewellery.
In terms of the tumbling stock market, the HSBC report held that the sharp fall in the market had a limited negative wealth effect because shareholders represent less than 5 percent of the population.