Sustaining Spending

Increased income has inspired a consumption boom By Liu Xinlian

Sustaining Spending

Increased income has inspired a consumption boom By Liu Xinlian

Huang Mei, a migrant worker from Sichuan Province now living in Beijing, is satisfied with her income. She earns 3,000 yuan ($473) per month as a cleaner in a department and an additional 2,000 yuan ($316) from household cleaning.

“Although I have to work long hours, I am happy to earn 5,000 yuan ($790) a month.As far as I know my income was even higher than some university graduates,” said Huang.Huang’s husband also earns around 5,000 yuan as a courier in Beijing.

For many Chinese, the past year has been one of increases in wages, because of various government policies.

Increased incomes will inevitably help boost consumption. According to the National Bureau of Statistics (NBS), retail sales of consumer goods totaled 16.35 trillion yuan ($2.58 trillion) in the fi rst 11 month of 2011, growing 17 percent year on year.

It’s foreseeable that the government is sure to continue its efforts to boost residential income.

Fan Jianping, chief economist with the State Information Center, estimates that retail sales of consumer goods may grow by 13.2 percent in 2012, and nominal growth in the indicator will likely be 17 percent.

Swollen pockets

Wang Bin, a primary school teacher in Sichuan Province, earns 3,300 yuan ($523)per month. In the four years after he took the teaching job, his salary only increased 20 percent.

But for Wang, the biggest change in his payroll in 2011 is the zero under the individual income tax category.

Effective September 1, the amended individual income tax law raised the monthly tax exemption threshold from 2,000 yuan ($313)to 3,500 yuan ($547).

Under the new amendment, about 7.7 percent of wage earners pay taxes, down from the previous 28 percent. The number of income tax payers has been reduced from 84 million to 24 million.

Meanwhile, a total of 21 regions across China adjusted their minimum wage standards in the fi rst three quarters of 2011, with an average overall increase of 21.7 percent year on year, according to Yin Chengji, spokesman of the Ministry of Human Resources and Social Security.

Shenzhen, Guangdong Province had the highest nationwide minimum wage at 1,320 yuan ($207) per month and Beijing had the highest minimum hourly wage at 13 yuan ($2)per hour, said Yin.

According to the NBS data, the percapital income of urban residents was 16,301 yuan ($2,575) in the first three quarters of 2011, with a nominal growth of 13.7 percent.Urban residents’ wage income grew 11.9 percent. For rural residents, their per-capita cash income was 5,875 yuan ($928), with a nominal growth of 20.7 percent, and their wage income grew 21.9 percent.

Diversified shopping

Last year, for many Chinese netizens, frequenting online shopping sites became a part of their daily routine.

Liu Xinlu, a housewife in Shenzhen, has been an online shopper for more than three years. This year nearly 30 percent of her expenses were spent on online purchases.

“Whatever I need, I go to Taobao.com I have a parcel to arrive almost everyday,” Liu said.

Online shopping has become the new engine of China’s consumer economy, said Qu Weizhi, President of the China Electronics Chamber of Commerce.

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 fi rm 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 fi rst 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 fi rst eight months of last year.

Worries remain

CONSUMPTION BOOM: Customers pick up cosmetics at a duty-free shop in Sanya, Hainan Province

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 fi nancial 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.