Farmers' Consumer Spending enters Period of Accelerating Growth

A recent report by the National Bureau of Statistics said that for every 1% growth in farmers' net income, their consumer spending for industrial goods increased 1.3%. There are 870 million farmers in China which make up 238 million families. An one percent increase in the demand for any industrial good would result in a 2.38 million increase of that product needed to meet the demand. China's rural residents' consumption of industrial goods relative to their net income is currently in a period of accelerating growth. There is a huge potential in farmers' consumption of durable goods, services and housing.

In 1999, 24 out of every 100 rural residents owned a washing machine, 11 had a refrigerator and 38 owned a color television. If the 238 million families had the same ownership ratio as urban residents in 1999, 210 million color TVs, 160 refrigerators and 130 washing machines would need to be produced in the next 10 years.

Consumer spending on medical care, transportation and educational services accounted for 15% of farmers' consumer spending in 1995 and increased to 22% by 1999. Consumer spending on harvesting, processing, shipping, breeding and planting services also saw large increases. Agricultural accounting data shows that expenditures on farming, forestry, livestock and fishing industry services reached 122.5 billion yuan in 1999, up 40% from 1995.

In 1999, the average area of newly built houses by farmers was 5.4 square meters. Based on calculations derived from the average cost of housing, every farmer invested around 800 yuan in their new homes. All told, 238 million farmers used more than 128 million square meters of land to build new homes and invested more than 190 billion yuan into their new homes. Moreover, between 10%-15% farmers remodel their homes every year. Preliminary figures show that farmers invest more than 200 billion yuan into their homes every year.

Since 1991, the absolute quantity of China's agricultural labor has decreased and the amount of farm machinery, fertilizer and electricity has increased dozens-fold. Scale farming driven the integration of agricultural production, processing, storing shipping and sales. The chain of demands the development of integrating industries will be a important area for long term investments in the future.



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