(China Daily)
Updated: 2007-10-08 10:16

To make solid domestic demand a thick cushion for sustainable economic growth, China needs to not only adopt more pro-consumption policies but also reduce the consumption gap between rural and urban residents.

China's retail sales have expanded quickly, with an average annual growth rate of 12.2 percent between 2003 and 2006.

Thanks to the country's efforts to narrow the development gap between urban and rural areas, farmers' income and consumption have been increased considerably too. A report by the National Bureau of Statistics pointed out that the rural market's contribution to China's overall retail sales growth has risen from 21.3 percent in 2002 to 30.2 percent in 2006. The gap in retail sales between rural and urban areas in terms of year-on-year growth narrowed from 7.7 percentage points in 2002 to 1.7 percentage points in 2006.

It is an encouraging change that the growth of rural consumption is gradually catching up with that of urban consumption. That means farmers have earned more and are eager to improve their living standards.

However, given the huge gap between urban and rural consumers, even faster rural consumption growth can only mark the beginning of a long-term effort to bridge the country's rural-urban development gap.

To make the rural market as important as the urban one in boosting domestic consumption, policymakers need to further increase both farmers' income and public spending on social courses in rural areas.

Last year, the per capita income of rural residents grew by 7.4 percent to 3,587 yuan ($478). Their income increased by more than 6 percent for three consecutive years, which was rare in the past. Meanwhile, the average income of urban residents was 11,759 yuan in 2006, up 10.4 percent from 2005. The ratio of urban and rural residents' income was thus widened to 3.28:1 last year from 3.21:1 in 2004.

Admittedly, rising income has enabled farmers to spend more. Their per capita living expenses increased to 2,829 yuan in 2006 from 1,834 yuan in 2002, up 54.2 percent. But to allow farmers to spend more to improve living standards, their income level has to be substantially raised.

The national coffers have reaped more revenue in recent years. This has made it possible to make more payment transfers to the economically backward rural areas.