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Monday, November 17, 2003

And It's Up and Up We Go

Overheating or not overheating: that is the question. Do you know, I don't think any of us really has a clue. This is uncharted territory, and that is the measure of just what the problem could be. Flying blind isn't easy.

China’s retail sales increased in October at their quickest pace in two years, as domestic consumption recovered from the effects of severe acute respiratory syndrome and people spent in earnest during the National Day holiday.

Retail sales jumped 10.2 percent to Rmb420.4bn (US$50.7bn) in October compared with the same month a year ago, China’s State Statistical Bureau said on Monday. The jump in October was the biggest month-to-month increase since October 2001, when sales grew by 10.5 per cent. From January to September, retail sales climbed 8.6 per cent year on year.

The data is the latest evidence that growth in China’s economy, the sixth-largest in the world, continues unabated. Last week the government released data showing consumer prices increased 1.8 per cent from a year earlier - its fastest annual rate in six years. Also in October, China’s trade surplus ballooned to $5.74bn, its highest in more than half a decade, and exports were $40.93bn, up 36.7 per cent from a year ago. Industrial output rose 17.2 per cent in October from a year earlier.

The surge in consumer spending in October was driven by weeklong Golden Week celebrations centred on the October 1 National Day holiday, the bureau said. The holiday spurred demand for transportation, travel and retail. Autos, furniture and mobile phones were among the best-selling items.

The Golden Week holiday was the first major opportunity for Chinese consumers to spend in large amounts after Sars disrupted holidays and travel plans earlier this year as people stayed home to avoid contracting the virus.

Sales of telecommunications equipment, automobiles and furniture rose 74.6 per cent, 48.4 per cent and 40.4 per cent, respectively, year on year in October.

Concern is growing that such consumption coupled with demand from the industrial sector reflects economic overheating. Last week China reported a 40 per cent year-on-year rise in imports, setting the country on course to eclipse Japan as the world's third largest importer behind Germany and the US.

Imports have been fuelled by ravenous demand for construction materials amid soaring investment in real estate and for products such as steel used in the vehicle industry.
Source: Financial Times

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