According to statistics from the Chinese Academy of Social Sciences, the average farmer’s net income reached 3,587 yuan last year, up 7.4 percent from a year earlier. In the first quarter this year, average rural income grew 12.1 percent. The steady growth of the income of farmers has enabled them to spend more, leading to a faster growing and potentially huge rural market.

Currently, the rural population, accounting for two thirds of China’s total, contributes only one third of the country’s total retail sales of consumer goods. With heavy investment from the Central Government and outside investors, the rural economy, along with it rural consumption, will take off.

Boosting the service industry

The Chinese tertiary industry, or the service sector, is being increasingly favored as a point of foreign investment, according to the State Administration for Industry and Commerce (SAIC). This is a shift from the previously favored low added-value and manufacturing industries, said SAIC.

The number of foreign companies investing in the service sector nationwide totaled 75,000 in 2006, a growth of 100 percent over a year before.

Increasing costs of human resources as well as limitations and costs of energy and other resources in China will stimulate more foreign investment to shift to service and hi-tech industries in the future.

Direct selling lucky draws

Since the promulgation of Administrative Regulations on Direct Distribution in December 2005, the Chinese Ministry of Commerce has approved 14 foreign companies and five domestic companies to conduct direct selling.

Direct selling, by cutting out intermediaries and directly targeting consumers, can greatly reduce operational costs of a company and give it a price edge in the market. Direct sales, however, have sometimes led to illegal conduct.

The 14 lucky foreign (or foreign-invested) companies are: Avon Products (China), Nu Skin (China) Daily-Use & Health Products Co. Ltd., Baojian (China) Co. Ltd., Ningbo Yofoto 3Sheng Commodity Co. Ltd., Oriflame Cosmetics (China) Co. Ltd., Kasly Ju (Tianjin) Co. Ltd., For You Group, Mary Kay (China) Cosmetics Co. Ltd., Perfect (China) Co. Ltd., Amway (China) Co. Ltd., Guangdong Apollo Group Co. Ltd., Nanfang Lee Kum Kee Co. Ltd., Shaklee (China) Co. Ltd., and Herbalife (China) Health Products Ltd.

Regulations restrict direct sales to five specific areas: cosmetics, health care food and beverages, cleaning products, health care equipment, and small kitchenware.

Digging for gold in golden week

As usual, this year’s May Day holiday marked another golden week for consumption. According to the Ministry of Commerce, total retail sales of consumer goods topped 320 billion yuan ($41.56 billion), up 15.5 percent from the same period last year, with food and beverage taking the lead by 17 percent.

The best sellers during this year’s golden week were liquid crystal TV sets, air-conditioners, jewelry, digital products and clothing. Online shopping is also catching on and becoming popular, especially among Chinese youth. The B2 C (business to customer) and C2C (customer to customer) sales in major online shopping centers like taobao.com, ebay.com.cn, and dangdang.com all saw their number of deals grow over 30 percent during the week.

Chinese consumers are also becoming more engaged in health and knowledge-oriented consumption. Working out has become a new trend and has led to healthy sales of sports equipment and gym memberships.

“Going to the countryside” was a slogan often heard (and seen on the roads) during the holidays. Many urban dwellers chose to travel to and stay in the countryside for fresh air and relaxation, leading to a boom in the rural vacation business.

Holding a wedding during the golden week is now a cliché. Even so, wedding dinner consumption rose 40 percent from the same time last year, as people now spend more on their wedding receptions. Many middle- and high-priced restaurants were reserved for holiday dinners as far back as a month before.