With the help of a series of agricultural policies in China, the consumption potential in rural market is having a stimulating impact on consumption. However, much still needs to be done to exploit the full potential.

Retail sales of consumer goods in urban areas rose by 15 percent in May, while in rural areas the growth rate is 15.6 percent.

In April, the total retail sales of consumer goods in rural areas totaled 1.3 trillion yuan, up by 16.9 percent year on year, and the rate was 2.8 percentage points higher than in the city.

In May the whole country's retail sales of consumer goods totaled 1.0028 trillion yuan, up by 15.2 percent.

The Ministry of Commerce pointed out that China's consumer market in rural areas is expanding. Per capita consumption expenditure of rural households was 3660.7 yuan last year, an increase of 88.4% from 2003. Per capita annual living expenditure of food, clothing, housing, household appliances and services, transportation and communication, culture and entertainment, and health care have increased greatly. The consumption structure in rural areas is gradually upgrading, and Engel's coefficient of farmers decreased.

But there are still two major difficulties in invigorating the commercial circulation of the current rural areas and expanding rural consumption.

First, the poor rural consumption environment constrains farmers' demand. The traditional "family-run shop" and small grocery stores are still the mainstay of retail outlets in rural areas. About 260,000 supermarkets or convenient stores have been built in rural areas in recent years. But that only covers 49 percent towns.

Besides, for a long time, the poor infrastructure in rural areas does not facilitate logistics or commercial circulation. These lead to relatively high logistic costs of goods in rural areas.

Second, the income level of farmers restricts purchasing powers ability to increase. In 2008 per capital annual net income of rural households was 4761 yuan, increasing by 81.6% from 2003. But the absolute income gap between urban and rural residents in 2008 grew by 88.4 percent on 2003.

At the same time, the absolute gap between total retail sales of consumer goods in urban and rural areas reached 3.1 trillion yuan last year, increasing by 125.9 percent on 2003.

By People's Daily Online

http://paper.people.com.cn/rmrb/html/2009-06/18/content_277090.htm