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Chinese consumer confidence remains strong amid financial crisis

(Xinhua)
Updated: 2009-05-04 15:04

Kirk John-Williams registered a cosmetics trading company in China only three months ago. Although the world economy has been affected by the financial crisis, the Trinidad and Tobago businessman is confident in the Chinese consuming market.

"The financial crisis won't have too much impact on Chinese consuming market. The upper class may have been affected by the economic downturn, but most people from middle class are not badly hit. Chinese consumers are still willing to spend," he said.

Economists believe China's exports may recover later this year. The most effective means to spur economy at the moment should be stimulating domestic consumption.

Related readings:  New buyers opt for thriftier cars, says Nielsen  Higher income fuels consumer spending  China's CPI falls 1.2% in March  Consumer confidence robust

"China should have learnt a lesson that an export-oriented economy is not sustainable. Stimulating domestic consumption will not only spur the economy, but also meet the needs of the general public," a researcher from China National School of Administration, Ding Yuanzhu, told Xinhua.

China's economy rose 6.1 percent year-on-year in the first quarter. Consumption contributed more than 4 of those percentage points. Retail sales during the same period increased by 15.9 percent. Urban residents' disposable income rose 11.2 percent and rural residents' rose 8.6 percent.

Chinese consumers are less pessimistic on economy than those of other countries. According to a survey by Nielsen of 50 countries and regions, only 35 percent of Chinese people believed the domestic economy was in a contraction. The figure was the lowest among the 50 world markets.

The survey report said Chinese consumers were "willing to spend and feel that the next 12 months would be a good time to buy things they needed."

"Chinese consumers still have strong confidence on economy. People are still willing to travel, spend money on clothes and buy advanced technologies. This is a young but energetic group," Neilson's Vice Chair Susan Whiting said.

The Neilson contributed the confidence to the 4-trillion-yuan ($585 billion) stimulus package and abundant domestic deposit.

In the auto market, stimulus packages are taking effect. Auto sales showed strong signs of recovery after the country cut purchase taxes for small engine-sized cars and rolled out detailed stimulus package for auto sales in rural areas.

According to the China Association of Automobile Manufacturers, auto sales topped 2.64 million units in the first quarter, up nearly 6 percent year-on-year. The quarterly sales overtook the United States for the first time to become the world's largest auto market.

Ye Zi, who has been working in Beijing for nearly three years, just bought a 1.6 liter car which cost her more than 100,000 yuan.

"In such a big city, driving a car would be a lot more convenient. I can afford a car now, and the government reduced the purchase tax for small cars, so I bought it," she said.

Echoing the recovering auto market, the 13th Shanghai International Automobile Industry Exhibition, which ended on April 28, became an auto fest for carmakers.

Floor areas for the exhibition hit a record of 170,000 sq meters this year. More than 1,500 auto and auto part companies, including those from China, the United States, Germany and Japan, took part in the exhibition.

"Automakers are cutting funds for auto exhibitions across the world, but the Shanghai exhibition is an exception. If they only have budget for one exhibition, that will be the Shanghai exhibition, because China is the only growing auto market in the world," vice president for the Shanghai International Exhibition Co, the organizer, Lu Ren said.

During the 9-day show, more than 600,000 visits were made. Some high-end brand cars, such as Rolls-Royce and Bentley, were sold out on the media day before the exhibition started. The Chinese market has become the most important for automakers across the world.

According to Volkswagen's first quarter report, China has overtaken Japan to become Bentley's fourth largest market. Last year, Bentley's sales in the global market fell 25 percent year on year, but rose from 318 units to 518 units in China, up more than 60 percent.

In addition to auto markets, home sales in the first quarter also showed positive signs.

At April's Beijing Spring Real Estate Trade Fair, from April 8 to 12, more than 150,000 people visited the fair and signed intention contracts worth more than 3 trillion yuan.

"Houses are one of the largest spending for Chinese people. They may spur consumption in related sectors such as decoration, furniture and home electronic appliances. Home sales may play a big part in stimulating domestic consumption," a researcher with the National Development and Reform Commission, Zhang Hanya, said.

"The catering industry may best reflect Chinese consumers' willingness to spend," John-Williams said. "In major cities like Beijing, Shanghai and Guangzhou, I have not seen any signs of economic contraction."

Ding said there were two approaches to spur economy.

"One is short-term stimulus plan, which may rely on investing real estate industry and infrastructure projects. The other is long-term stimulus plan, such as urbanization, social insurance system improvement, education and technologies."

The first round of stimulus package aimed at quickly spurring the economy, but new stimulus packages should focus more on long-term goals. People will spend more only when they feel social insurance has been put in place," he said.