Commodity market growing steadily


Updated Mon, 02 Aug 2004 00:00:00 GMT

China's commodity market will continue to register steady growth in the second half of this year, but this will be slightly slower than the first half of 2004.

    Retail sales of consumer goods are likely to grow by 10.5 per cent year-on-year to 5 trillion yuan (US$602 billion) during the July-December period, said the Ministry of Commerce, while sales in the means of production are expected to grow by 15 per cent to 10 trillion yuan (US$1.2 trillion).

    Qi Jingmei, a senior economist with the State Information Centre, said that a steady growth in retail sales will be music to the ears of the central government, which is vying to cool down investment but lift consumption.

    Retail sales stood at 2.5 trillion yuan (US$304 billion) in the first half of this year, an increase of 12.8 per cent year-on-year, the ministry said.

    The growth rate was 4.8 percentage points higher than the same period of last year, it said.

    Catering industry grew rapidly, becoming a new growth area for retail sales, the ministry said.

    The ministry said the central government should pay attention to five major issues including a low consumption rate, a slow growth in rural sales and an increased stock of commodities, in order to maintain the sustainable development of the nation's commodity market.

    China's average consumption rate stood at 58.5 per cent over the past 10 years, the ministry said.

    That rate was 20 percentage points lower than developed countries.

    During the first half of this year, China's retail sales growth hit a record level last seen in 1997.

    But the growth rate was 22.3 percentage points lower than that for fixed asset investment.

    As a result, the consumption rate dropped to 55.4 per cent, the lowest level since 1978.

    Figures from the National Bureau of Statistics suggest that per capita income earned by both urban and rural residents increased by a big margin during the first half of this year. However, the consumer confidence index dropped.

    Car sales dropped 5.6 percentage points during the first five months compared with the same period a year ago, and sales of commodity housing also declined 3.2 percentage points.

    Development of the rural market was also far from satisfaction, although the government has taken a series of measures to fuel the development of agriculture and rural areas, the ministry said.

    Rural retail sales rose by 9.1 per cent year-on-year during the first half of this year. But the growth rate was 5.6 percentage points lower than that in urban areas.

    The increased stocks was also a major concern for the government as it works to further develop the commodity market.

    By the end of May, stocks of steel, alumina, cement and automobiles grew 8 per cent, 25 per cent, 3 per cent and 35.6 per cent, respectively, compared with a year ago.

    The increased stocks resulted in increasing costs, leading to a slide in companies' profits, the ministry said.

    Other issues such as the weak competitiveness of the distribution sector and local government restrictions could also have a great impact on the development of the commodity market.

    Zhang Junkuo, a senior researcher at the State Council Development Research Centre, said China's overall economic performance was good at the moment.

    "The national economy kept stable and enjoyed fast growth, economic efficiency was improved continuously... residents' income rose obviously," he said.

    Uncertainties and unhealthy factors existing in economic performance have also been placed under initial control, Zhang said.

    However, the government should be aware at the same time that major problems existing in the economy have not been rooted out fundamentally, he said.

    Energy and transportation bottlenecks and rapid growth in fixed asset investments in some sectors are still a cause for concern, he said.

    But the government should not take further tightening measures to cool growth, because fixed asset investment, money supply and other indicators have slowed markedly.

    Fixed asset investment declined 14.4 percentage points during the second quarter compared with the first quarter.

    Broad money supply or the M2 rose 16.2 per cent year-on-year in June, according to the People's Bank of China.

    The growth rate was 4.7 percentage points lower than a year earlier, and 1.3 percentage points down from the previous month.

    Outstanding renminbi loans were up 16.3 per cent in June.

    The growth rate was 6.8 percentage points lower than a year earlier and 2.3 percentage points down from the end of May.