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Business
Print Edition> Business
UPDATED: January 4, 2012 NO. 1 JANUARY 5, 2012
Sustaining Spending
Increased income has inspired a consumption boom
By Liu Xinlian
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The trading volume of China's online retail market stood at 212 billion yuan ($33.6 billion) in the third quarter of 2011, up 58 percent compared with the same period in 2010, according to Enfodesk, an information platform of the Beijing-based consulting firm Analysys International. During the first half of 2011, online retail sales totaled 370.7 billion yuan ($58.6 billion), with a year-on-year increase of 74 percent.

In addition to online shopping, Hong Kong has also been a shopping paradise for Liu.

"I went to Hong Kong for shopping almost every month," Liu said.

Last year there were a growing number of mainlanders visiting Hong Kong for cheaper groceries and other goods.

According to a research report of HSBC, the number of mainland tourists to Hong Kong reached record levels in 2011. The first half of 2011 posted 21-percent growth.

Tourist arrivals to Hong Kong typically were higher in the second half due to several holidays.

The bulk of spending per capita for an overnight Chinese mainland visitor to Hong Kong is on shopping (73 percent), far higher than for any other spending category, according to the report.

Buyers from abroad generate 40 percent of Hong Kong's store sales, and two out of every three visitors to Hong Kong are from the mainland.

According to Hong Kong's official figures, its retail sales, boosted by Chinese mainland tourists, surged 26 percent to HK$264 billion ($34 billion) in the first eight months of last year.

Worries remain

Although in the past year people gained increase in their income and spent more, lingering inflation, loss in investment and an incomplete social safety net still undermined their satisfaction with their financial status, which may affect their spending in the new year.

The consumer price index, a major gauge of inflation, rose to a 37-month high of 6.5 percent in July. Although it dropped to 4.2 percent in November, the 5.5-percent increase during the January-November period is still well above the government's 4-percent control target for the year.

In the first three quarters, per-capita income of urban residents only grew 7.8 percent in real term, lower than the GDP growth rate of 9.4 percent.

With inflation rates higher than interest rates of bank deposits, ordinary people tend to invest more, instead of saving.

But last year, many Chinese investors felt annoyed with their investments in stocks and funds.

Nancy Ren, a vice general manager of a foreign-invested IT company in Beijing, said she lost 40,000 yuan ($6,320) in her investment in stocks.

"I am not the only one who suffers loss in stocks. Nine out of 10 of my friends lost money," Ren said.

The Shanghai Composite Index slumped more than 20 percent in 2011.

"I will not withdraw from the stock market. Depositing money in the bank is even more unworthy," said Ren. "I believe Chinese stock market will pick up next year since most of stocks are undervalued," she said.

Even with an annual household income of 500,000 yuan ($78,990), Ren felt it is not right time for her to be lavish in spending money. "I must save more money," she said.

"My mother does not have a pension because she was a rural housewife. My son is going to primary school two years later. If I want to send him to a private school, it may take me at least 200,000 yuan ($31,595)," Ren said.

Email us at: liuxinlian@bjreview.com

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