Retail sales show no sign of slowing

Beijing has reported sturdy retail sales and foreign direct investment for last month, reinforcing the message from other data that the mainland economy shows little sign of losing momentum.

With growth set to top 9 per cent this quarter for the 10th quarter in a row, economists said policymakers were likely to feel comfortable about letting the yuan rise further now that they could see the economy had absorbed July's landmark 2.1 per cent revaluation.

"By the end of 2005, money market interest rates may rise by around 25 basis points, and the renminbi will appreciate more rapidly against the dollar," said Ha Jiming, chief economist with CICC, China's largest investment bank.

The yuan hit a post-revaluation high of 8.0831 per US dollar yesterday as traders bet that US President George W. Bush would pile on the pressure for a stronger yuan when he visits Beijing at the weekend.

The currency, which was unshackled from the dollar in July and allowed to float within a tightly managed range, has now inched up a further 0.33 per cent against the dollar.

Last year, America's trade deficit with China grew to US$162 billion and it is poised to pass US$200 billion this year. Beijing is alert to the political sensitivities of trade and is trying to redirect the economy away from export-orientated investment towards consumption.

Retail sales rose 12.8 per cent year on year last month to a record 584.7 billion yuan, the National Bureau of Statistics said in Beijing yesterday, as higher incomes spurred spending on cars, clothing and televisions.

Clothing sales increased 17 per cent last month, home appliance sales jumped 24 per cent and cosmetics sales were 15 per cent higher, the report showed.

Sales of telecommunications equipment and vehicles both surged 27 per cent.

The State Information Centre said last week it expected retail sales to rise by as much as 13.5 per cent next year after estimated growth of 12.8 per cent this year.

"Retail sales will extend the solid trend next year as the government gradually unveils policies encouraging consumption, such as an increased threshold on personal income tax and a probable increase in salaries for civil servants," said Zhu Jianfang, an economist with China Securities in Beijing.

Rising incomes are underpinning consumption. Urban workers had 9.8 per cent more disposable income in the first nine months than a year earlier, while rural incomes rose 11.5 per cent.

Foreign direct investment, which accounts for just 6 per cent of total investment, reached US$48.41 billion in the first 10 months of the year, down just 2.1 per cent from a year earlier.

The Ministry of Commerce said contracted investment, for deals signed but not yet executed, came to US$145.08 billion in the first 10 months of this year, up 22.5 per cent from a year earlier.