MNI EXCLUSIVE: Chinese Retail Sales To Improve In Q4: Advisors

By Wanxia Lin

     BEIJING (MNI) - Chinese retail sales will pick up in the fourth quarter,

underpinning economic growth following a record low 6% y/y rise in GDP in Q3,

government advisors told MNI.

     The rate of expansion in retail sales may rise to around 8% y/y in the

fourth quarter, from 7.8% in September, helping to stabilise GDP growth at 6% in

the final three months of the year, said Zhang Yiqun, director of the fiscal

studies institute affiliated with the Jilin province finance department. That

would mean annual growth would fall in the target range of 6 - 6.5%, Zhang

added, suggesting that the government further stimulate consumption by boosting

incomes, reducing charges for services such as telephones and internet, and

relaxing restrictions preventing researchers, teachers and health workers from

seeking additional private incomes.

     Liu Xiangdong, deputy director of the economic research department at the

China Center for International Economic Exchanges, saw retail sales growth above

8% y/y and 6.1% or 6.2% GDP growth in Q4, taking the annual increase in GDP to

6.2%, if previously-announced stimulus measures to boost investment take effect.

     Both advisors believe car sales, which have declined for 15 consecutive

months, will bottom out in Q4. A recent relaxation of limits on car purchases

should help, said Liu, while Zhang said that the low base for comparison will

the same period last year will boost the numbers, even if any rebound will

likely be temporary.

     --INVESTMENT OUTLOOK

     The advisors were divided on the outlook for investment. According to Liu,

property investment will maintain double-digit growth of around 10% y/y until

the end of this year, while infrastructure investment growth will rise somewhat

from the 4.5% recorded from January to September, as newly-started projects ramp

up. But Zhang said investment growth generally peaks in the second and third

quarters.

     Zhang and Liu agreed that a change to consumption tax earlier this month,

gradually shifting the responsibility for its collection from producers to the

wholesale and retail sectors, should have little effect on consumers.

     Only a relatively small proportion of goods will be affected by the initial

stage of the reform, with the responsibility for collecting taxes on more

expensive items, such as high-grade watches, jewelry and jade, being first to be

transferred, said Liu, adding that he did not expect much effect on prices.

     The reform is aimed at fortifying local government finances and providing

them with incentives to promote consumption, although some provinces, such as

the liquor- and tobacco-producing regions of Guizhou and Yunnan provinces in

western China, may lose revenues as a result. Richer provinces in eastern China

should benefit, the advisors said, calling for the reforms to be enacted at a

measured pace, and to be accompanied by other measures such as increased

transfer payments to the west of the country.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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