China's 2007 retail sales may rise 15.8 percent to 8.8 trillion yuan ($1.16 trillion), the fastest annual growth pace in a decade, according to research by the country's top planning agency.

Direct sales of products to consumers may rise 12.8 percent this year after adjusting for inflation, said the National Development and Reform Commission's State Information Center, in a report today published in the China Securities Journal.

Increasing sales may help boosting domestic spending to sustain growth in the world's fourth-largest economy, reducing the country's reliance on investments and exports.

Higher urban and rural income, rising food inflation, improving social security and rapid increase in restaurant sales this year have driven a faster growth in urban and rural spending, according to the report by researcher Qi Jingmei.

China's 2007 urban retail sales will probably rise by 16.2 percent to about 6 trillion yuan, while sales in the rural villages may expand by 14.9 percent to 2.9 trillion yuan, Qi wrote in the report.

"Consumers tend to withhold spending when they expect prices to fall further, and they may increase spending when they sense prices are on the rise," Qi wrote in the report.

An inflation of between 3 percent to 5 percent is "acceptable" if China's economy expands by as much as 11 percent in 2007, Qi said.