China's economy may bottom out in 2012

Edited and translated by Li Qian, People's Daily Online

Good consumption trend

The social retail sales increased 14.1 percent from January to August, and actual increase was 12.1 percent in real terms, presenting the following characteristics:

First, goods that underwent fast growth in sales such as furniture, building materials are all related to real estate.

Second, sales in rural areas, second and third tier cities exceeded the first tier cities.

Third, consumption by the middle class maintained a rapid growth.

Fourth, non-manufacturing index exceeded 50 percent, except in February, which indicated the expansion trend of service industry, as well as relatively good momentum of domestic trade and consumption. Car sales showed a weakening trend. It increased 7.7 percent from January to August, and 2.4 percent in August. Car sales for the whole year is expected to be below 10 percent. Rebound in real estate and land sales also boosted the demand of home appliance and decoration.

In addition, the Golden Week holiday consumption was hot in October. According to data from the Ministry of Commerce, from September 30 to October 7, the sales of national key monitoring retail and catering enterprises amounted to 800.6 billion yuan, up 15 percent from the Golden Week in 2011. The tourist information bulletin issued by the national tourism administration shows in the period of the holiday, 119 scenic spots monitored received 34.2 million visitors in total, up 21 percent from 2011. Tourism income reached 1.8 billion yuan, up 25 percent year on year.

Analyzing from the policy level, the state council is mulling the new policies about sending home appliances and cars to the countryside, which will further stimulate the rebound of consumption.

The relatively good consumption in 2012 is related with the sustained attention to vulnerable groups with low income and achievements made in solving the problems of agriculture, rural areas and farmers in the past three years. The income in rural areas grows faster than the city, and urban minimum incomes have significantly increased. While narrowing the income gap and easing social contradictions, the public consumption maintained good momentum and become the important driving force for the growth of national economy.

Based on the above analysis, the retail sales of consumer goods is likely to see a slight rebound in Q4, and it will reach 20.6 trillion yuan in 2012, up 13.7 percent from previous year. The actual growth will be 11.6 percent in real terms, which is basically the same with 2011. Taking into account the expected growth rate of 7.7 percent for 2012, consumption is 3.9 percentage points higher than the GDP, and is only 2.1-2.4 percentage points higher than the previous years, which indicates consumption has made tremendous progress in driving economic growth and optimizing growth structure.

Inflation has shown a trend of slowdown in 2012. Now that the PPI is still negative and price of imported goods is still falling, it is estimated that China's CPI will be 2.2 percent in 2012.

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