China's 60 Years of Change: Booming consumption market

The pattern for production and distribution chains of the planned economy has been gradually broken since the commercial reform started from 1978.

The rising income of both rural and urban citizens, together with their increasing purchasing power has triggered more consumption of high-end products, and the consumer economy has entered into a period of consistent, stable and rapid development, reflecting today's unprecedented prosperity.

The development of the market has gone through four phases.

First, the socialist reform of the old capitalist industry and commerce that took place from 1949 to 1957.

Second, the establishment and development of the public-ownership system occurred between 1958 and 1978.

Third, the rapid market development period that lasted from 1979 to 2000.

During this period, the retail value of consumer goods jumped to 3,910.57 billion yuan in 2000 from the 155.86 billion yuan in 1978, increasing 24 times, while average annual growth reached 15.9 percent.

The production and distribution chains under the planned economic system were gradually overturned, and new production and distribution chains that suited the new market economy were developing.

This development has meant that today, some 95 percent of all tradable goods are allocated by the market, and the government sets prices for no more than 5 percent.

Fourth, the accelerated market expansion period that lasted from 2001 to 2008, when the sales of consumer goods soared to 10,848.7 billion yuan in 2008 from 4,305.54 billion yuan in 2001, posting an average annual growth of 14.1 percent, 3.5 percentage points higher than the growth during the "ninth-five years plan" from 1996 to 2000.

A SEA-CHANGE IN SUPPLY Commodity supply in China, evolving from being tight to be relaxed, has experienced "three strides" in the past 60 years.

First, the consumer goods supply was quite tight in the period from 1952 to 1989.

Second, the short supply gradually became eased between 1990 and 2000, during which effective supply strengthened remarkably, and consumer goods became more widely available.

In other words, a sellers' market gradually changed into a buyers' market.

Third, the change from adequate supply to relative oversupply started from 2000. A market that had become dominated by buyers was consolidated.

In recent years, the relationship between domestic supply and demand for consumer goods has become more coordinated.

The proportion of commodities with supply-demand equilibrium rose to 28.7 percent in the second half year of 2008 from 18.4 percent in the second half of 2000, while the proportion of commodities that saw more supply than demand fell to 71.3 percent at the second half of 2008 from the 79.6 percent at the second half of 2000.

STABLE AND PROSPEROUS MARKETS China's market of consumer goods has showed rapid development with the market continuing to expand.

Retails sales increased 390.7 times to 10,848.7 billion yuan in 2008 from the 27.7 billion yuan in 1952, posting an averaged annual growth of 11.3 percent.

The averaged growth of consumer goods reached 15 percent during the "sixth five-year plan (1980-1985)", 14 percent during the "seventh five-year plan (1986-1990)", 23.3 percent during the "eighth five-year plan (1991-1995)", 10.6 percent during the "ninth five-year plan (1996-2000)", and 11.4 percent during the "10th five-year plan (2001-2005)".

The modern unified urban and rural market has presented certain features: First, both the urban and rural markets have achieved prosperity, and helped drive up demand for consumer goods.

In 2008, the outlay on urban consumer goods hit 7,373.49 billion yuan, and the figure for large- and medium-sized towns came to 3,475.28 billion yuan, 1.3 times and 1.1 times that for 2002 respectively.

Rural market's contribution to the growth of consumer goods increased to 30.9 percent in 2008 from 21.3 percent in 2002.

Second, the market operation was basically stable, and the guide of market to production has been strengthened.

It is estimated that some 70 percent of the raw materials used in China's light industrial productions originated from agriculture products, the majority of which are purchased in the market.

After the reform of the production and distribution chains, the proportion of raw materials procured in the market got a further boost.

While providing necessary raw materials for agricultural and industrial production, the market also provides information about changing demand for producers, thus helping them adjust the structure of agricultural and industrial production and optimize the product mix.

PACE OF MARKET CONSTRUCTION HAS ACCELERATED The commercial reform kicked off in 1978 has broken the single distribution pattern under the planned economy system: operation subjects on the consumer goods market have expanded greatly over the years; the ownership has become diversified; and an economic structure featuring co-development of various economic factors, fair competition and complementation has taken shape.

In 1983, China granted the equal political and economic status to collectively owned commercial enterprises as it has granted to State-owned commercial enterprises, boosting collective and private commerce greatly.

Then, the 15th National Congress of the CPC held in 1997 defined non-pubic-sector (individually-owned and privately-run) businesses as an important part of the socialist market economy.

By the end of 2008, altogether there were 61,535 various consumer goods markets, of which 26,902 were general ones, 26,280 were agricultural products and by-products ones, and 7,042 were industrial consumer goods ones.

By sector, retail sales of the wholesale and retail sectors soared to 9,119.85 billion yuan in 2008 from 21.13 billion yuan in 1952, realizing an annual growth of 11.4 percent; the income of the accommodation and catering industry increased to 1,540.39 billion yuan from 1.41 billion yuan, an averaged annual growth of 13.3 percent.

In 2008, the wholesale and retail sectors' contribution to the growth of retail sales hit 83.3 percent, and lifted retail sales up 11.5 percentage points. The wholesale and retail sectors have come to dominate the market.

After 60 years' of development, China has established all kinds of business mode, which took the developed countries over 100 years to have them put in place.

Besides large department stores, whole-sale markets, China has also established supermarkets, shopping centers, convenience stores, exclusive selling, malls, exchange center of leftover products, discount shops, and franchised distributors, as well as such non-store operations as shopping online, TV shopping and direct selling.

To open up commodity distribution sector has been an important part of China's opening up. In 2007, there were only 7,546 new foreign-invested commercial enterprises launched in China (in sectors of wholesale, retail sale, accommodation and catering industry and other services), which actually used 4.44 billion US dollars of foreign capital, accounting for 5.9 percent of the total foreign investment in 2007.

Of China's top 100 retailing enterprises in 2007, 17 were foreign-invested ones, and they accounted for 22.9 percent of the total sales volume of the Top 100.