The Ministry of Commerce revealed that retiling sales of China's consumer products had topped 5 trillion yuan by early days of December which set a historical record. A preliminary forecast for the whole year was 5.2 trillion yuan as a result of an expected 13 percent of increase over the last year.

The first trillion yuan happened in 1992, 14 years after China launched its reform and opening-up policy in 1978. Three years later, in 1995 another trillion yuan was added. The year of 1999 witnessed a new record of 3 trillion yuan. This was refreshed in 2002 when the sales exceeded 4 trillion.

The driving force behind the record high 5 trillion yuan comes from several increases in this year's consumer market.

Consumption grew averagely on a monthly basis. From January to October this year, retailing sales stood above 400 biliion yuan every month and the gap between the peak and the bottom was 90 billion yuan. This means the contrast between months were not as stark as it used to be. A relatively stable market is a reflection of steady income increase for urban and rural residents who have developed more rational consumption incentives.

The rural market managed to keep pace with the urban market. In October, the urban areas led the rural areas by merely 2.6 percentage points. And in September and October, the growth of commercial retailing sales in counties even outraced that in big and medium sized cities, which was a real miracle for years.

The catering sector in particular marched forward aggressively. Catering business has enjoyed a booming year. Each month this year, except February when the Chinese lunar new year was not celebrated, saw faster upward movement of catering business than the same month of last year.

Sectors playing the leading role in the commercial circulation continued to gain momentum. Chain stores, logistics and e-commerce all prospered and began to gain more ground in the market. For the first half of the year sales of the top 30 chain stores in the country jumped 38 percent over the same period of last year, leading far ahead of the 12.8 percent growth of the average consumer products sales. Demands for private cars, housing and communication products were brisk.

The real growth of the disposable income of farmers and urban population registered over 6 percent and 7 percent respectively after the factor of prices was taken into account. The newly created employment topped 9 million people. And businesses launched effective marketing mix to promote their products.

All of these can be attributed to the implementation of the scientific idea of development which laid a good foundation and the macro-control campaign which adjusted the relationship between the investment and consumption, said an article in People's Daily.

5 trillion yuan, albeit massive, is far from enough compared with the potential of the domestic market. The economic conference held by the central government at the beginning of December required to exploit more consumption incentives and a 10 percent growth has been set as the goal for next year's retailing sales.

However, the article also listed the price hikes as a factor pushing the sales up. Retailing price index has kept rising this year. The consumer price index for 2004 is estimated at about 4 percent, the highest since 1997.

Uncertainties still exist for next year's prices. A Xinhua research highlights six issues that will bear direct bearing on prices in 2005.

As the engine of this round of price hike, grain prices began to drop in the 4th quarter of the year after a upswing in the first three quarters. This will turn grain prices into the best "stabilizer" from a boost to the CPI next year. But the government's protection for the grain prices leaves little room for further fall of grain prices.

New factors may replace grain as the factors underpinning the prospect of higher prices. The lingering headache of tight supply of coal, power, oil and transportation has propelled prices of production materials. Therefore, experts call for close attention to costs-driven price upturn and warned against over optimism for next year's CPI.

The fever haunted the real estate sector has aroused controversy and concern. Many economic analysts insisted that demand was the revenue source of Chinese developers. But consumers were angry with the price surge which reached 20 percent in some cities. Foreign bankers believe that there was bubble on the market.

The frenzy of the property investment will serve as a spur to costs of iron and cements and make energy and transportation a more risky bottleneck. This brings mounting pressure of cost-driven price hike.

However, experts reassured that in 2005 housing would not stimulate the prices of production materials as fiercely as it did this year.

Experts agreed on the impact of carryover effect caused by the price hike in the second half of last year but divided on whether the effect would last until next year.

The oil prices which repeatedly set new records on the world market this year also added to the pressure of price inflation. Fortunately things seemed to have turned better. Oil price declined to nearly 40 USD in the beginning of December.

However, international experience tells us inflation is generally a serious challenge in the year following the bulging oil price on the world market. Given a two-month time lag of adjustment of oil prices on the domestic market, the sharp price ascending on the world market since August this year is lurking about the price curves for the 4th quarter of this year and the first half of next year.

The fixed asset investment constitutes another variable. The storm of macro-control has tamed the spree of the investment. But the possibility of a rebound still put jitter on the market.

The central government shows no tolerance on any relaxation of the control over the investment. It vows to step up the coordination of industrial, credit and land policies to ward off any come-back of investment on iron and steel, cement and aluminum.

By People's Daily Online