Slowdown expected in retail sales growth

China's retail sales, a key indicator for consumer spending, will only rise by around 12.4 percent in the second quarter from a year ago due to downward pressure on the economy and increasing risks in the property market, a government think tank said in a report on Monday.

The forecast of 12.4 percent growth is higher than the first quarter's actual growth of 12 percent in retail sales but still falls below the annual growth target of 14.5 percent.

The slowdown in upgrading of the country's consumption structure and downward pressure on the economy has weakened consumers' confidence, the State Information Center said in a report published by China Securities Journal on Monday.

Increasing risks in the property market may also have an adverse effect on demand, the report said.

Although China's working-age population has started to decline, rural laborers continue to move to cities and economic development is still mainly driven by investment, the report said.

But the report also recognized that despite the slowing growth of consumption, its contribution to the country's economic growth continues to increase.

China should create new growth points for consumption and push ahead with income distribution reforms to improve consumer confidence, the report said.

On Monday, China Resources Enterprise Ltd - controlled by China Resources, one of the largest State-owned conglomerates - reported a 10.3 percent decline in profit at its retail unit in the first quarter.

The company, which operates a number of hypermarkets in Asia, attributed the profit decline to the slowdown of the domestic economy.

"Retail sales in the second quarter will definitely grow faster than in the first quarter. But since factors favorable for boosting consumption are not evident, sales are likely to grow by between 12.2 and 12.3 percent year-on-year in the second quarter," Zhao Ping, deputy director of the Consumption Economics Department at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Monday.

"As the 4G coverage continues to expand, information-related consumption - including mobile Internet services and smartphone sales - and consumption in the services sector will become new highlights in the coming period," Zhao said.

Retail sales grew 11.9 percent year-on-year in April, down from the 12.2 percent expansion in March and lower than the 12 percent growth in the first quarter, official data showed earlier this Month.

The April data also showed consumer spending accounted for 64.9 percent of GDP in the first quarter, up 1.1 percentage points from the same period of last year.

"Because of outdated statistical techniques, data for online consumption, which has grown robustly in recent years, has not been completely included into the final official economic statistics," Cai Jin, a vice chairman of the China Federation of Logistics & Purchasing, told the Global Times on Monday.

"With moderate growth of prices and faster expansion of online shopping, there is no need to worry about consumption in the near future," Cai said.

Monday's report came after Premier Li Keqiang was quoted by State media as saying on Sunday during his visit to Inner Mongolia last week that downward pressure on the economy is still large and the country will use policy tools and preemptive fine-tuning in a timely and proper manner to help ease financial strains for the real economy.

The comment was interpreted by some economic observers as a sign of impending monetary easing, such as cutting the reserve requirement ratio (RRR) and interest rate.

"Policy easing does not necessarily mean lowering the RRR and interest rate. The government is likely to use credit policy such as bond issuance to ease the financial strains," Cai said.

The Ministry of Finance announced Wednesday that the country will allow 10 local governments to raise money by selling municipal bonds directly, marking a breakthrough in China's fiscal reform.