By Wang Wei

Since 2001, the development of China's consumer goods market has been on a steady growing trend, and growing consumer demand has become an important base for the steady and fast development of the national economy. In 2002, the consumer goods market will continue to maintain the steady and growing development trend.

Ⅰ.Basic Features of the Consumer Goods Market in 2001

(I). The consumer goods market developed steadily.

In 2001, total retail sales of consumer goods reached 3759.52 billion yuan, an increase of 10.1% over the previous year, and the growth rate was 0.4 percentage point higher than the one of last year. In terms of the growth trend, all months, excluding the first quarter in which the growth rate fluctuated, maintained a high growth rate ranging from 9.6% to 11% (as shown in Chart 1). In the second, third and fourth quarter, the growth rate registered at 10.3%, 9.8% and 10.0% respectively, 0.5, 0.4 and 0.8 percentage point higher respectively over the same period of the previous year.

It is worth noticing that the growth rate of consumer goods retail sales, against the background of a low retail price level, has exceeded GDP growth for the second consecutive year. In 2001, the growth rate of the total retail sales of consumer goods was 2.8 percentage points higher than the GDP growth rate, a 1.1 percentage points growth over the previous year. According to estimates by the State Information Center, the contribution rate of the domestic consumption demands to the GDP growth was 51% in 2001. This indicated that the economic policy in recent years, featuring the stimulation of domestic demands, had paid off, and the steady and fast growth of the consumer goods market has become an important factor supporting the Chinese economic growth.

(Ⅱ).The pattern of low price level of consumer goods was maintained.

In 2001, the overall Consumer Price Indices (CPI) registered a meager 0.7% rise, slightly higher than 0.4% in the previous year. The overall retail price indices dropped by 0.8%, and the tumble margin was reduced by 0.7 percentage point as compared with the previous year. The main features of the price situation in 2001 are as follows:

First, tile price level rose and then dropped, in terms of monthly CPI, it rose slowly from January to May, and the price level rose by 1.7% in May over the same month of the previous year. The price level from January to May rose by 1.1% over the same period of the previous yeah From June, the price level started to turn down. The price level in September, November and December dropped, and in December, the price level dropped by 0.3% over the same month of the previous year.

Second, tile CPI by category of commodities presented big difference. Of the eight kinds of consumer goods, the price level of food, medical and healthcare and daily necessities remained basically unchanged, the price level of housing, and recreation, culture, education and service items rose by 1.2% and 6.6% respectively over the same period of the previous year.l This was the main factor contributing to the rise of the overall price level. The price level of cigarette and wine, clothing, household appliances and service, transportation and telecommunications dropped by different margins. Of them, the price of clothing, household appliances and service dropped by 1.9% and 2.3% respectively over the same period of the previous year, registering a relatively big margin of decline.

Third, the price level in different regions was unbalanced, and more regions registered price rise. In 2001, the CPI of 18 provinces, autonomous regions and municipalities registered a rising trend. In 2000, 42% of the provinces, autonomous regions and municipalities registered a rising price trend, but the percentage rose to 68% in 2001, In addition, the CPI of rural residents for the first time reversed the decline trend for three consecutive years and began to rise, the yearly price level rose by 0.8% over the previous year (0.1% in 2000). The rising rate exceeded the price level of urban consumption by 0.1 percentage point.

(Ⅲ). Tile adjustment o f supply-demand structure of consumer goods sped up.

In 2001, the consumer goods market was still a buyer's market, meaning the supply was bigger than the demand, but the adjustment of supply-demand structure began to speed up. According to the survey of supply-demand situation of 600 major commodities conducted by China Commercial Information Center, the percentage of commodities with over supply in the first and second half of the year was 87.2% and 82.9% respectively, dropping by 4.3 percentage points in the second half. The percentage of commodities with a balanced supply and demand increased, reaching 17.1% in the second half or 4.3 percentage points higher than the first half.In 2001,there was no commodity in short supply.

(IV)The structural disparity of the consumer goods market became increasingly remarkable.

First, the development gap between the rural and urban market further widened. In 2001, the urban consumer goods market basically maintained a high growth rate, the annual retail sales stood at 2.35434 trillion yuan, registering an increase of 11.5% over the same period, and the growth rate was 0.9 percentage points higher than the previous year.The consumer goods market at or below the county level fared smoothly, but the growth rate was relatively low, the rural market development below the county level, in particular, has been hovering around 7-8%. The yearly retail sales of rural consumer goods market at or below the county level stood at 1.40518 trillion yuan, registering a growth of 7.7% over the same period, and the growth rate was 1 percentage point lower than the previous year (see Chart 2).Therefore,the gap between the urban and rural consumer goods market reached 4.2 percentage points, widening by 1.9 percentage points compared with the previous year.consumer goods became remarkable. In terms of the sector structure of the retail sales of consumers goods in 2001, the retail sales of wholesale and retail, catering *industry and other sector increased by 10.7%, 16.4% and 4.9% respectively. It could be seen that tile growth rate of different sectors varied by about 11 percentage points. In terms of the internal structure of the wholesale and retail industry, the development speed of tile wholesaling and retailing also varied greatly. Take tile enterprises above designated size in wholesaling and retailing for example, from January to November, 2001, the sales growth of the wholesale and retailing enterprises increased respectively by 3% and 12%, their gap in growth was nine percentage points.

Third, The sales growth of different consumer goods by category also varied. According to surveys of 35 kinds of commodities of 200 large retailing enterprises, the retail sales of the 200 retailing enterprises from January to September in 2001 increased by 18.2% over the same period of the previous year. Of them, the growth rate of retail sales of 17 kinds of commodities exceeded 20%, the sales of four kinds of commodities declined, and sales of 14 kinds of commodities maintained a steady growth.

(V).New hot spots and growth point of consumption took shape.

In 2001, some new hot spots and fields of consumption began to develop fast,the market scale expanded further, and they became important force supporting the development of consumer goods market.

First, holiday consumption became a dominating factor in the consumer goods market. In January, May and October with long holidays, the retail sales of consumer goods increased by 12.5%, 11.1% and 10.5% respectively, forming the three growth peaks of the consumer goods market in 200l (see Chart 1).

Second, The upgrading of consumption structure helped propel the fast growth of the sales of new consumer goods. At present, the consumption structure of China's urban and rural residents is upgrading fast, thus leading to the fast growth of the sales of new consumer goods such as telecommunications, automobile, housing decoration, recreation and cultural products. According to statistics of the enterprises above the designated size in the wholesaling and retailing sectors, from January to November, the sales of telecommunication equipment increased by 53.6%, petroleum and products by 28.8%, construction and decoration products by 27.9%, automobiles by 17.9%, cultural products and office appliances by 17.5%, books and periodicals by 11%.

Third, credit consumption expanded fast. As supported by related state policies, credit consumption, a new kind of consumption mode, developed fast in thc past years. By the end of 2001, the amount of various consumption loans across the country had reached 699 billion yuan, marking an increase of 275.5 billion yuan over the beginning of the year, or an increase of 16 billion yuan than that of the same period of last year. Of this amount, personal housing loans reached 599.8 billion yuan, marking an increase of 228.2 billion yuan over the beginning of the year or an increase of 35.3 billion yuan over the previous year. This increase played an important role in stimulating consumption.

Fourth, the fast development of new sectors as tourism and exhibition also helped prosper the consumer goods market. Statistics show that in 2001 the number of overseas tourists to China exceeded 90 million and the foreign exchange revenue from tourism stood at about $20 billion, an increase of 14.6% and 15.1% respectively over the previous year. In recent years, China hosted various large conferences and exhibitions, such as the APEC meeting in Shanghai, the world Universiade and the Ninth National Games, these activities played a stimulating role in promoting the market of the host cities. For example, in November, the Ninth National Games in Guangdong Province helped the retail sales of consumer goods in the province increase by 13% over the same period of last year.

(VI). Competition of the consumer goods market became increasingly fierce

Along with the further opening of the retailing sector, consumer goods market is lacing an increasing pressure from international competitors. By the end of 2001, Wal-Mart of the United States had opened eight outlets in four cities,Carrefour from France had opened 28 outlets in 15 cities, and Metro from Germany opened seven outlets in three cities. The combined retail sales of the three foreign competitors accounted for about 2% of the total retail sales of consumer goods in China. Facing competition from international retail giants, domestic industrial and commercial enterprises had taken active measures to intensify the efforts to restructure and expand to meet the challenges. In addition, competition among domestic distribution enterprises has also become fierce. In the traditional department stores and the newly emerged speciality shops such as household appliances speciality shops, various forms of competition methods were adopted, and competition has become throat cutting.

Ⅱ.Causes Analysis on the Steady and Fast Development of Consumer Goods Market in 2001

Against the backdrop of steady and sustainable development of the macro economy, the fast development of consumer goods market in 2001 was promoted by various policies to stimulate domestic consumption and was supported by increasing adjustment of consumption structure, the improvement of consumption environment and the growth of consumers' confidence.

(I). Recent policies to stimulate and expand consumption have produced an active effect.

Since 1999, the state has adopted a series of policies aimed at expanding domestic demands and promoting the healthy and sustainable economic development.Table 1 highlights various policies to stimulate and expand consumption adopted in recent years and their effects. These policies, since their adoption, have played positive role in stimulating and expanding domestic demands and consumption, and are the main factors in driving up the fast development of the consumer goods market.

Table 1. Major macro policies on stimulating and expanding consumption in recent years and their effects

In 2001, the above policies were enforced effectively. First, wages standards of civil servants were further increased and the income level of low-income groups,was raised. In January and October 2001, the state increased the wage standards of civil servants twice, pensions for the retirees were increased and the amount in arrears paid. In some regions, the minimum wage standards were raised. All these helped increase the income level of urban residents. Second, the credit consumption policy was further improved. The People's Bank of China and other departments adopted some measures to standardize credit consumption and consumption loans, such as the Notice Concerning the Standardization of the Housing Financial Services, Several Opinions Concerning the Management of Education Loans for College Students in Studies, and the personal credit assessment system was also promoted. Third, new policies were adopted to promote consumption fields such as car buying and housing. In 2001, the State Development Planning Commission lifted price controls on domestically manufactured cars, and governments at all levels eliminated about 200 kinds of unreasonable fees and charges on car consumption, thus stimulating the buying of cars by urban and rural residents. Fourth, the college recruitment was further enlarged and policies to improve the environment of higher education institutions were also adopted. In 2001, new recruitment of colleges and universities was increased by 300,000, and the number of graduate students was increased to 162,000, an increase of 42,000.Recruitment of undergraduates and graduates increased by 13.6% and 35% respectively over the previous year. In addition, of the treasury bonds issued in 2000 and 2001, about 4 billion yuan was channeled each year to improve the facilities of colleges and universities. Financial policies such as education loans to help college students in studies were also promoted to help students from low-income families to complete their study.

(II). The income level increased steadily, and the speed to upgrade the consumption structure was quickened.

In 2001, the income level of urban and rural residents rose fast, thus becoming an important base supporting the fast development of consumer goods market. Influenced and driven by the income rise of the civil servants and increase of pension for the retirees, the overall income level of urban residents rose. In 2001, the per-capita annual disposable income of urban household was 6,860 yuan, an increase of 9.6% over the previous year, and the growth rate was 2.3 percentage points higher than that of the previous year. Comparatively speaking, although farmers'' income also rose, the growth rate was slower than that of the urban residents. In 2001, the annual per-capita net income of rural household was 2,366 yuan, an actual increase of 4.2% over the previous year, and the growth rate was obviously higher than that of previous year.

The steady growth of the income level of urban and rural residents directly promoted the adjustment and upgrade of the consumption structure of urban and rural residents. In 2001, the per-capita annual living expenditure for urban residents was about 5,300 yuan, an increase of 5.5% over the previous year. In terms of consumption expenditure structure of urban residents, the expenditure on food consumption dropped further. In 20011 the Engel coefficient of urban residents was 37.9, a drop of 1.3 percentage points from the previous year. The proportion of their expenses on transportation, telecommunications, recreation, education and cultural services, housing and medical care increased to 39%, a rise of 2.2 percentage points over the 36.8% in 2000. In terms of expenditure growth, the growth in transportation and telecommunications, recreation, education and cultural services, housing, and medical care was fast, increasing by 15.5%, 11.3%, 8.1% and 6.3% respectively. The expenditure on food and clothing maintained a steady growth, up by 1.9% and 5.6% respectively. But their expenditure on household appliances dropped slightly. It is obvious that the key consumption fields of urban residents have undergone significant changes.

In the first half of 2001, cash expenses of rural residents on living consumption totaled 661.1yuan, an increase of 6.8% over the same period of the previous year. In terms of the structure of cash expenditure, the proportion of food consumption was 37.1%, a slight drop over the previous year (37.5% in the same period in 2000) Because the consumption expenditure by rural residents included a large amount of non-cash expenses, the Engel coefficient of rural residents still hovered around 50%. In terms of the growth of cash expenditure, expenses on medical care, transportation and telecommunications increased rapidly, by 16.1% and 15.6% respectively over the previous year, and the expenses on foods also increased fast, at 6.1%. Their expenses on clothing, housing and home appliance as well as services rose slowly, by 1.2%,
4%,and 3.8% respectively. It could be seen that the consumption structure of rural residents was also undergoing adjustment. Although expenditure on food still took the lion's share, various consumption items other than food began to increase steadily and the growth rate was picking up.

(III). Growing confidence o f consumers supported the expansion of consumption activities.

In 2001, the state promoted the construction of social security system, some regions had issued reform policy to allot dwelling houses in the form of cash and began to distribute housing subsidies, the experiments in medical care system reforms began to take effect, Plus the policies as salary rises and the increase of the three security standards, consumers began to build up confidence for current consumption. In 2001, the consumer confidence index always remained as high as 97 points, e.g., 97 in January, 97.4 in June and 97.1 in December, it was remarkably higher than that of the same period in 2000 (see Chart 3). It is safe to say that the restoration and buildup of consumer confidence in 2001 supported the expansion of consumption demand. Consequently, it supported the growth of the consumer goods market in 2001.

(IV).Market order turned for the better and consumption environment was improved.

In 2001, governments at all levels adopted a series of policies and measures to rectify the market and economic order. According to statistics, since April 2001, relevant departments of governments at all levels have adopted more than 10 laws and regulations; waged wars against crimes in faking, counterfeiting and producing and selling shoddy commodities in food, medicine, cotton, farming materials and illegal automobile assembling sectors; and arranged and executed campaigns against pyramid selling and strived to rectify and standardize the culture and construction markets, and to strengthen tax collection control. In the whole year, more than 500,000 illegal producers and sellers of fake goods were cracked, and more than 1.2 million cases were investigated, involving 16.4 billion yuan. More than 1,400 illegal markets were outlawed, more than 60,000 unlicensed vendors were banned, more than 2,400 illegal pyramid selling cases were investigated and more than 2,500 pyramid selling organizations were outlawed. Tax fraud cases involving 8.65 billion yuan were investigated, helping to recover 1.89 billion yuan for the state. Courts across the country handled 8,818 cases of crimes disrupting the market economic order, involving 14,873 people. The above measures played an active role in improving the order of the national consumer goods market and protecting the rights of consumers, and were conducive to the steady growth of consumption demands.

Ⅲ.Development Prospect of the Consumer Goods Market in 2002

(I).Tile macro economic environment is turning for the better while great external pressure is mounting

Generally speaking, guided by the policies of expanding domestic demands, China has developed an economic growth pattern based on the expansion of investment and consumption demands. This will be the foundation for China''s economic growth in 2002 or even a longer period in the future. Against the backdrop of sluggish economic growth in the world, China''s macro economic policy in 2002 will continue to prioritize the expansion of domestic demands so as to propel the steady growth of the national economy. Therefore, China will continue to maintain a fast economic growth in 2002, thus laying a solid foundation for the continuous and sustainable last growth of the consumer goods market in 2002.

Comparatively, the world economic growth allows no optimism in 2002, and it is still difficult to forecast whether or not the US economy will move up from the low ebbs. The sluggish world economic prospect will have a certain impact on China''s economic growth and the performance of the consumer goods market. With the waning economy of major developed countries and lack of growth potential, many Asian countries have emerged or been in the process of emerging the phenomenon of decline. According to analysis, the economic development of China in 2002 will face a growing external pressure, particularly the drop in foreign trade volume and international market prices will, to a certain extent, worsen the supply-demand relations on the domestic market and will affect the stability of the pricing level.

(II).Income level of urban residents is expected to increase, and incorne of rural residents will maintain steady.

In 2002, China's economic growth will maintain a steady growth, and investment scale is expected to grow, the economic efficiency of enterprises will also improve. These will be conducive to maintaining the steady growth of the income level of urban residents, as well as to alleviating the employment pressure in cities.In 2002, the state is expected to further increase the wage standards of civil servants, therefore, tile income level of urban residents will increase. It is noteworthy that tile current economic structure adjustment, reforms of state-owned enterprises and institutional reforms are deepening, the number of the unemployed and laid-offs is not expected to drop remarkably in 2002. Therefore, the employment situation is still rather grave, and it will consequently affect the overall growth of the income level of urban residents. It is estimated that the income growth of urban residents is expected to remain the same or will be slightly higher than that in 2001.

Under the conditions of continuing the planting structure adjustment, commercializing the operation of agriculture and introducing the new type of means of production in agriculture, such as to encourage farmers to grow crops on a contract basis, the income from selling agricultural products and sidelines by rural residents in 2002 is expected to increase, Given the fact that the current price of grains in China is higher than that in the international market, there is little room for further rise in the price for grains and other agricultural products after China''s accession to the WTO.Furthermore, China is also facing the competition and challenge posed by the imports of agricultural products. Therefore, it will be difficult to have a big rise in the income of rural residents from agricultural production and operation. At the same time, with the conditions that urban employment situation is still rather grave, the opportunities for rural laborers to seek jobs in cities will also be affected to a certain extent. The large-scale development of township and village enterprises is also restricted by many factors as technology, management and system, therefore, it affords no optimism for income increases from non-agricultural sectors for rural residents. It is estimated that the income level of rural residents in 2002 will roughly maintain the level of 2001.

(III).The consumer goods market will continue to maintain the pattern of over-supply.

In 2002, the structural contradiction in