By  on October 19, 2007

SHANGHAI — Consumption is expanding in China, at least according to the retail figures from the recently concluded National Day holiday.

Celebrating the founding of the People's Republic, the holiday period runs Oct. 1 to 8, and this year saw a climb of 16 percent year-on-year spending to nearly 350 billion yuan, or $46.6 billion at current exchange, according to figures from China's Ministry of Commerce. The growth in 2005 was 14.5 percent to 300 billion yuan, or $40 billion.

China's three annual weeklong holidays — Chinese New Year in January or February, May Day and National Day — were introduced in 1999 to boost retail consumption. They proved so successful that they are now called Golden Weeks by the Chinese press, with travel, weddings and large household purchases concentrated during the mandated holidays. Ministry of Commerce surveys focusing on the cities and provinces of Shanghai, Chongqing, Jilin, Jiangsu, Liaoning, Shanxi and Heilongjiang saw particular spikes in purchases of apparel, electronics, jewelry and automobiles. Shanghai alone hosted 30,000 weddings during the holiday week.

"Usually the best sectors are appliances — families go together and choose a new TV, cooker, fridge, etc.," said Paul French, director of consumer research group Access Asia. "Furniture and home decor should do well, as well as other family-based decisions. Clothing sees a bit, but not much. Plastic surgery is a massive spend — they can have the job done and by the return to work the swelling has gone down."

French warned against reading too much into the holiday retail bump, however. "There is always a bounce during a Golden Week — but in a sense it doesn't matter as it evens out over the year — i.e., next week's sales will be down as everyone did their shopping during the holiday," he explained. "It doesn't really say anything except that it's a holiday — [which is the] same everywhere: i.e., Labor Day weekend, Christmas, etc., in the West, you see the same thing."

The significance of the growth was also mitigated by China's spiraling inflation: The consumer price index rose by 6.5 percent in August, the highest monthly growth in a decade. Despite government measures aimed at cooling down the economy, the CPI is expected to have climbed an additional 6 percent in September. "Inflation most affects food sales — I think this will be seen more at Chinese New Year as people buy more food then," said French. "We already saw this [at the last] Chinese New Year as more people stayed home rather than eat out when the restaurants jacked up the prices."While Chinese mostly congregate at family homes during the traditional Chinese New Year holiday, the May and October breaks witness booms in tourism. According to China's General Administration of Civil Aviation, domestic air passengers this National Day week totaled 3.75 million, up 25 percent from last year. The holiday eve on Sept. 30 set an all-time record for single-day passengers of 540,000. The number of flights offered had risen 6 percent since October 2006, flying at capacities of 72 percent, compared with 65 percent a year ago.

During the holiday, Beijing welcomed 5.94 million visitors, up 3.5 percent from 2006, and tourism industries there earned 4.13 billion yuan, or $550 million, according to the Xinhua News Agency. Shanghai attracted 4.62 million visitors, up 15.2 percent year-on-year, who spent 3.3 billion yuan, or $439 million, during the week.

Shanghai saw a particular boom this year, in part because the holiday coincided with its hosting of the Formula One Chinese Grand Prix, the FIFA Women's World Cup and the 2007 Special Olympics Summer Games. According to a report issued by the Shanghai Economic Commission, sales at 425 surveyed retailers grew 20.5 percent year-on-year to 5.1 billion yuan, or $679 million, during the week, significantly larger annual growth than the 16.8 percent registered last May Day and 14.4 percent over the Chinese New Year holiday last February.

Hypermarkets, supermarkets and convenience stores drove the growth in Shanghai, said the report, but the city's restaurant sector dropped 16.4 percent year-on-year to 137.8 million yuan, or $18.4 million, and the hotel industry saw an annual decline of 3.2 percent to 97.2 million yuan, or $12.9 million. Holiday retail sales in Shanghai's suburbs rose an average of 16.6 percent year-on-year to 763 million yuan, or $101.7 million, with the Nanhui, Songjiang, Jinshan, Qingpu and Baoshan districts enjoying annual growth of over 25 percent.

Shanghai's government particularly advertised the Special Olympics, which attracted 7,200 athletes and 70,000 additional visitors to the city, and which officials viewed as a trial run for next year's Olympics in Beijing and the World Expo to be held in Shanghai in 2010. The event's closing ceremony on Oct. 11 at the Jiangwan Stadium featured celebrity performers such as saxophonist Kenny G, tenor José Carreras and Danish pop group Michael Learns to Rock.

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