Update on China Retail Sales of Consumer Goods - to be Slower in 2013

In 2012, China’s full-year annual growth was 7.8% -the weakest since 1999. After years of rapid growth generated by investment and exports, China has been looking to shift the focus of its economy to consumption to boost growth (read our previous article: Good Opportunity for Foreign Retailers in China's Consumer Goods Market). 

In the first quarter of 2013, data showed China retail sales in March rose 12.6% from a year ago; This is a large number however lower than expected and the industrial output grew 8.9% in March from 2012.

The annual growth in sales of consumer goods is expected to slow in 2013, with growth mainly driven by private consumption rather than public spending, according to the 2013 China Consumer Market Development Report released in May 2013, published by the Department of Consumer Economics at the Chinese Academy of International Trade and Economic Cooperation of the Commerce Ministry.
The sales of consumer goods will grow 13% year-on-year, lower than in previous years, according to the report. The banning of lavish banquets and bans on spending on luxury products using public funds will curb overspending and the sales of luxury goods, said China Daily.   The growth in retail sales of consumer goods will mostly be backed by demand from private consumers and a rise in incomes, the paper noted in the report.   The consumption of food and beverage products will remain strong, boosted by China's policies to increase incomes for lower and medium-income earners - the mainstream buyers for this sector.  Sales of clothing products will also grow rapidly, with more transactions made online and more exposure expected for Chinese brands, the report said. The fastest growth will be seen in the furniture and decoration materials sector, which is expected to increase 20%, supported by demand from second- and third-tier cities.

The growth of auto and electronic appliance sales - two sectors which rely heavily on stimulus policies - is also expected to remain sluggish in 2013.

Urban consumption, which accounts for 80% of China's overall consumption, is expected to grow at a slower pace than consumption by rural residents.

China’s annual consumer inflation cooled in March 2013 as food prices eased from nine-month highs and producer price deflation deepened, reported Xinhua news.  The consumer price index showed an annual rise of 2.1%, well below the 2.4% market consensus from a Reuters poll of economists.
Food safety becomes consumer priority

Food safety has become a top concern for consumers in China.  Quality, price and brand are no longer primary concerns for Chinese consumers, following a number of food scandals in recent years.  According to China Daily's interview with Wang Tie, senior vice-president of Ecolab Inc, a US-based producer of disinfectant and food safety services that conducted a joint survey of Ecolab and the Shanghai-based China Business News Group, almost 99% of participants would change their decisions on purchases because of food safety incidences. Citing the survey, Wang said consumers' concern for food safety resulted from a lack of transparency in the food processing chain, especially in original material purchasing, production and quality inspection.  Travellers from our office have expressed similar sentiments from long time China contacts they surveyed.  Young women with babies are particularly concerned about reliability of baby milk formula, babies clothing and toys and of items in the home reachable by infants.

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