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20 Mar 2009

International Economy

China’s Consumption Policy: Spurring Rural Retail Business in 2009 (Business Brief No.2460)

The retail business in China in 2008 showed continued growth over 2007. The market turnover in retail business there breached RMB10,000 billion, up 21.6 percent YoY, against the 4-percent growth in 2007. However, retail sales in China recorded a slowdown in 4Q08 amid the global crisis. During 2M09, Chinese retail sales showed slower growth of 15.2 percent. In urban areas, retail sales grew at a decelerating pace of 14.4 percent to RMB1.35 trillion, while rural retail sales posted declining growth of 17 percent at RMB653.9 billion. In 2009, growth in Chinese retail sales is expected to slow to 19 percent. To jumpstart the economy, the Chinese authorities have launched measures to spur domestic consumption, especially in rural areas. The program is expected to help the economy survive the crisis, with continued growth in retail business likely to be seen in rural areas for the foreseeable future.
Chinese rural consumption is expected to be boosted mainly by the government's measures to support growth in retail stores, upgrades in social welfare for all Chinese citizens, as well as the government's subsidies to spur purchases of electronic goods by rural people. This would eventually bolster their quality of life and consumption.
To cash in on greater opportunities in China's rural retail market, Thailand should thus expand investment and exports to the mainland. Among the promising businesses seen in their rural retail market are stores selling consumer goods, specialty stores specializing in such merchandise as electrical appliances, plus computers and parts, mobile phones, etc. On the export front, emphasis should be placed on shipments of food products such as canned/chilled/frozen food and raw materials. Bright prospects seem to lie ahead for our raw materials and intermediate products for their electronics industry amid the growing retail market for such appliances in China.

Also, focus should be on marketing strategies that are commensurate with demand in rural areas. Thorough studies should be conducted, especially on rural community consumption behavior and purchasing power before making new investments or business expansion there. Also of note would be China's regulatory challenges, especially when it comes to business operations in rural areas, along with ebbing Chinese demand amid the downturn and heightened competition from both local and multinational firms, especially in the rural areas of western China.

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International Economy