New move to boost domestic consumption

The State Council released its 12th five-year plan (2011-15) for domestic trade development Monday, with the hope of boosting consumption amid sluggish economic growth overseas, and emphasizing the need to build a modern circulation and distribution system.

The plan covers various industries including catering, accommodation and e-commerce, and targets annual retail sales of 32 trillion yuan ($5.06 trillion) by 2015.

"The plan is not surprising, given the slowdown in the country's exports," Wang Jun, deputy director of the Consulting Research Department at China Center for International Economic Exchanges, a government think tank, told the Global Times.

But Wang said there will be challenges in realizing the goal, given various signs of a slowdown in domestic economic growth.

China's GDP growth reached 7.6 percent year-on-year in the second quarter this year, down from 8.1 percent in the first quarter, according to data from the National Bureau of Statistics.

Domestic consumers' hesitancy in spending money is another obstacle. "People need to save money in order to buy apartments at the current high prices, and to prepare for their retirement as the social security system is imperfect. Wage growth is also slow," Wang noted.

The State Council warned that domestic trade will be affected by fluctuations in import prices for some international commodities, including ones that China depends on.

One of the key aspects of the plan is the call to set up a modern circulation and distribution system to boost retail industries like e-commerce.

The country will support the rebuilding and construction of a total of 200 logistics and distribution centers as well as a batch of logistics parks during the five-year period, the plan said, without disclosing specific supportive policies.

Construction of China's logistics and distribution centers is still in its early stages, and the existing centers fall well short of demand, an industry watcher said.

"High land prices pushed up by the over-heated property market are one of main obstacles for logistics and distribution center construction," said Pang Shiming, general manager of E-trans Information Development Co, affiliated with China Merchants Logistics.

China's cold chain logistics market, which is responsible for the storage and distribution of temperature-sensitive goods, is also underdeveloped, said Pang.

According to a white paper released by Jones Lang LaSalle in 2009, it is estimated that only 15 percent of products that should be temperature-controlled are handled properly in China.

"The cold chain logistics business has seen little development in the last few years, because of the high construction cost for refrigerated warehouses and high transportation costs," Pang noted.

Pang gave an example that 360buy.com, one of China's leading online shopping platforms, came to his company hoping to rent warehouses. But his company, which is one of the leading domestic logistics firms and has been in operation for a decade, did not have enough warehouses to satisfy 360buy.com's needs.