China's Economic Characteristics Viewed From Consumption Situation

From January to April of this year, the total retail volume of consumer goods in China's urban and rural areas increased 10.1 percent over the same period last year, when price rebound factors are taken into account, the actual growth was about 9 percent, with the growth rate being about 3 percentage points over the same period of the previous year.

If the figure of the first five months is worked out, then the consumption volume in this period was about 12 percentage points over last year's same period, with the growth rate standing at about 6 percentage points.

Coupled Axle-Show of Price Hike

There are the following factors leading to the rise in this year's consumption: First, price factor, second, holiday factor, third, phased economic re-heating. The holiday economy leading to rise in consumption is a chance factor, while phased pickup of the economy is a basic factor, but this factor is not clearly manifested. More attention should be paid to the price factor.

Influenced by the surge of international oil price, since the beginning of this year, the purchasing prices of raw and semi-finished materials, fuel and power have begun to climb. Among the many products, cotton and rolled steel saw the greatest price increase and affected the most extensive area.

Now let's come to see the manifestations of the price of oil products. The period of price fluctuation of oil products maybe much longer than that of cotton and rolled steel. Failing to timely avoid the international oil price peak, importing department invariably purchased when oil price was the highest, therefore the influence of these high-priced oil has begun to gradually make its appearance in the domestic market. By mid-May, the prices of these petrol and diesel had finally jacked up for the third time.

Due to the above factors, the prices for China's industrial goods continued to rise in April, factory price was 2.6 percent higher than that in the same month of last year, the purchasing prices for raw and semi-finished materials, fuel and power climbed 5.3 percent, the factory price for the means of production also rose 5.3 percent. These factors have, to some extent, led to a surge in the statistics of production and consumption. But when the price factor is deducted, the factual growth of production and consumption is likely to be only 2 percentage points higher than that of last year.

Taken as a whole, the price pickup in the first half of the year is mainly caused by the rise in the international price of crude oil and in the price set by some domestic monopoly industries, this is a price rise stimulated by cost, while the price factor boosted by consumption and investment demands is very small, so it cannot demonstrate that the relationship between market supply and demand has changed. But attention should be given to the fragility of the Chinese market, the price will quickly rebound once there is a sign of disturbance or trouble. Although there is man-made speculative factor, it also gives expression to this question: What does China's economy lack at present?

Attention Should Also Be Given to the "Old Economy"

At present, mass media makes the fiercest speculation on high technology, the new economy, internet and risk investment, some people have even raised such a question: Which is strong and which is weak between the new and the old economy? But in real life, price rises most steeply is for that of basic products-the means of production, while the prices for high-tech products assumes a constant downward trend, internet even sustains losses instead of making profits.

This situation shows that what people need most are industrial products and consumer goods related to their daily life. This type of products have not developed to an extent of abundance for a developing country such as China, but rather they show that the market is weak, the price fluctuates radically, and there is actual pace for business and profit.

At present, people have reached a final conclusion on the new economy and the old economy. In China, a developing country where there is an extremely big gap between town and country, for the majority of people, their primary need is to have adequate to eat, to wear and houses to live in, second is the need to install telephones and computers and to have cars. In the order of living requirements, the majority of Chinese have only achieved the objective of getting enough food and clothing. As regards comfortable housing,, it is still only a dream for many people. Therefore, in the next decade, the general objective for the Chinese economy is not to tail after developed countries to blindly follow high-tech trends, but instead, it should gradually realize its own basic goals, the proportion of the old economy should be far greater than the new economy. Large numbers of factories should try to satisfy the consumers' demand for food, clothing, housing, transportation and recreation.

Therefore, in the next 10 years, the Chinese economy will remain in the economic period of "civil engineering, and iron and steel", this is the most important characteristic of China's economy. Information technology serves only as a lubricant, the consumers will not directly enter the information consumption stage of computer networking by skipping over the stage of basic requirement. Producers and consumers alike must not forget this important characteristic of China's economy. If one blindly follows the world trends, the result can only exhaust the people and drain the treasury, and waste resources.

Where Is the Potential Requirement?

At present, China's primary consumption demand originates from the residents' living requirements, the manufacturing industry remains the main force satisfying consumers' needs. A public opinion poll of Beijing indicates that the owning rates of articles in resident families in Beijing, Shanghai, Guangzhou and Shenzhen are as follows: color TV sets 102 percent, refrigerators 95 percent, washing machines 93.5 percent, telephone 68 percent, water heaters 54.6 percent, sound system 42.7 percent, air-conditioners 31 percent, personal computers 26 percent, digital video disc 6 percent. In regard to rural residents, it is estimated that the owning rate of farmer families in some regions is equal to zero.

This enormous disparity between China's town and country signifies that there is an enormous potential thirst for household products in China. Therefore, these household products can stimulate the development of a large number of enterprises and labor employment, hence, the development space for this market is tremendous in China. If, in the future, certain rural residents are gradually allowed to use household electrical appliances, it will generate still more consumption demand.

The urban and rural binary structure and the separation of urban and rural residences formed after the founding of New China in 1949 have led to the concentration of China's huge amount of wealth in cities, consequently, consumption demand also comes mainly from the cities. Although rural areas account for over 70 percent of the total population, consumption demand is less than one-third of the cities. 'If regions outside China's cities are not enabled to develop and become well-off, China's economy will continue to develop in a lopsided way and the wide rich and poor gulf between cities and the countryside will continue to widen. Large quantities of consumer goods will cater mainly for the wealthy group of urban people, the consumption level of this highest group will have no difference from that in developed countries. The final situation that will emerge will be: Some people only seek enough food and clothing, while another group of people will go on line with their handsets, and go E-shopping

The conclusion is: Only by breaking the lopsided economic structure and the urban and rural residence relationship, is it possible to eliminate the lopsided consumption phenomenon, to form a large-scale public consumer goods and to push China's economy to a new stage.

People's Daily Online --- http://www.peopledaily.com.cn/english/