Shanghai retail to see double-digit growth

Shanghai officials say that consumer goods retail sales in the city are expected to achieve double-digit growth this year.

Shanghai Municipal Economic Commission Vice-Director Chen Haigang revealed this at the 10th China Retail Conference and Exhibition.

Chen said that this growth reflected the local commercial sector's strong performance, but experts have warned that the sector may see further intense competition and low profitability, largely due to the imbalanced and massive growth of local commercial infrastructure.

"We believe the growth of Shanghai's consumer goods retail sales will be at least over 10 per cent this year," Chen said at a forum at the conference.

The city's consumer goods retail sales totalled around 101 billion yuan (US$12.2 billion) in the first five months of this year, notching up a 12.1 per cent year-on-year growth, Chen revealed.

Shanghai, China's commercial centre, had a consumer goods retail sales volume of about 222 billion yuan (US$26.8 billion) in 2003, with a 9.1 per cent year-on-year growth. The growth rate was 9.3 per cent in 2002.

But local commercial sector expert Chao Gangling warned that some problems were lurking behind the city's seemingly robust performance in this field.

"What makes me not so optimistic (about the sector) is that the growth of local commercial facilities' construction is much faster than that of market demand," said Chao, from the marketing research centre of Shanghai University of Finance and Economics, which has been tracking Shanghai and national commercial sector development for more than two decades.

Local commercial facilities had a total operating area of around 9.7 million square metres in 1997 - an average of 0.74 square metres per capita - with the figure soaring to around 23 million square metres in 2003, driving the per capita figure to 1.44 per square metres - even higher than Hong Kong, a mature commercial city in the region.

Shanghai now has about 70 large-scale supermarkets with a total area of about 700,000 square metres, but the construction of more than 70 hypermarkets with an area of 600,000 square metres is still being planned.

Shanghai currently has 14 shopping malls, sites which require heavy investment, with another 33 either under construction or planned.

Chao explained that if all of these facilities are put into operation within the next two or three years, shopping malls in the city will have a total area of around 3 million square metres.

"Such excessive commercial investments will only result in low profit margins for operators, a lack of diversity in their business areas, as well as cut-throat market competition," said Chao.

Shanghai's commercial sector requires new development guidelines to ensure that it grows in a healthy way, with policymakers focusing on controlling the sector's scale, restructuring and helping upgrade the competitiveness of businesses currently operating.

He stressed that more work is needed to develop the sector in the city's fast-growing suburban areas.

Chao predicted more closures or shake-ups in the sector in the years to come, as a result of the entry of more foreign firms as China fully opens its commercial sector to overseas investment at the end of this year in line with its WTO commitments.

Source: China Daily