China's retail sales grew in October at their fastest pace in two years as rising incomes and a credit boom enable consumers to buy more cars, homes and cell phones.
Sales in the world's sixth-largest economy increased 10.2 percent from a year earlier to 420 billion yuan (US$51 billion) after rising 9.5 percent in September, the Beijing-based National Bureau of Statistics said on its Web site.
Rising spending is helping China's economy grow three times as fast as the Group of Seven industrialized economies, and is fueling export-led recoveries in Asia and the rest of the world.
Goldman Sachs today raised its 2004 economic growth forecasts for China, Hong Kong, South Korea, Singapore and Taiwan.
"China is really becoming one of the main consumer markets in the world," Victor Fung, chairman of Li & Fung Ltd, one of Asia's biggest trading companies, said at a conference in Hong Kong. "Of the installed base of handphones in the world, 15 per cent are in China. That's a very big number." Singapore's economy expanded in the third quarter at its fastest pace in eight years as exports surged, the government announced today. Taiwan's economy grew during the quarter at its fastest pace this year and the government on Friday raised its 2003 and 2004 growth estimates, citing rising overseas sales.
Goldman raised its 2004 growth forecasts for Singapore and Taiwan to 5.8 percent from 4.5 percent and 5 percent respectively, today's research note showed. The securities firm, the third-biggest by capital, also lifted its estimate for South Korea to 6 percent from 5 percent previously. All three economies count China, including Hong Kong, as their No. 1 overseas market.
"China's importance as an export market for the rest of Asia has taken a quantum leap since 2002," Goldman Sachs Group Inc said today in a research note. "Asian exports have been revving up of late, again spurred by China." The firm raised its 2004 growth forecast for China to 8.1 percent from 7.3 percent and its projection for Hong Kong to 6 percent from 5.4 percent. Many goods bound for China are shipped via Hong Kong.
The average disposable income in China's towns and cities -- home to two-fifths of its 1.3 billion people -- rose 9 percent to 6,347 yuan in the first nine months of this year, the government reported in October. Salary increases in China averaged about 7 percent this year, more than double raises in the US, according to surveys by Hewitt Associates, a human-resources consultancy.
Farmers' incomes too are rising, helped by a 5 percent increase in food prices in the past year.
"The economy is expanding steadily and rising food and agricultural prices are helping increase rural residents' incomes, making it possible for them to buy more," said Qi Jingmei, economist with the State Information Center, a government think tank. "Retail sales growth will probably maintain this pace in coming months." As earnings rise, so too are borrowings. Domestic banks extended 359 billion yuan in consumer loans in the first nine months of this year, 7 billion yuan more than a year earlier, the China Banking Regulatory Commission reported previously. China's M2 money supply grew 21 percent in October, exceeding the central bank's 18 percent growth target for a 10th straight month.
Increased borrowing and spending are also boosting the nation's appetite for imports, which are becoming cheaper as tariffs slide following China's entry into the World Trade Organization.