In recent years there has been growing demand in the housing property and automobile markets. Due to a rapid increase in the average personal income, private purchases served as a new major growth point pushing the province's economy forward. However, the urban areas are experiencing a much faster development than the rural areas and people living in urban areas enjoy a much faster personal income increase than those living in the countryside, thus urban dwellers are more willing to spend. Statistics reveals that farmers, who make up nearly 60 percent of China's population, have contributed less than one-third of the total retail output.

In recent years, Guangdong officials have been increasing efforts to stimulate economic development in rural areas under the central government's strategy on constructing a "new socialist countryside".

Infrastructure projects to boost the rural economy

In the coming years, provincial and local governments will continue to invest in rural infrastructure and public service projects. The province's "Resolution on Accelerating Construction of New Socialist Country" issued last month has outlined ten guidelines for rural development. By 2010, all rural areas will have highways, electricity, mail service, passenger transportation services, telephone lines, and people living there will also be able to watch TV and have Internet access. Villages will improve roads and sewage systems. With the improvement of public services, these areas are expected to seek more foreign investment, unemployment is expected to decrease significantly and rural contribution to the national GDP will increase.

Farmers' income and spending growth

In the past few years, the central and provincial governments have issued a series of policies on tax exemption and providing allowances. The central government's decision on "deduction of two taxes and addition of three allowances" in 2004 helped farmers around the country to earn an extra 45.1 billion RMB. And in the past two years, Guangdong's farmers saw their annual income booking seven percent annual growth. During 2001-2005, Guangdong farmers witnessed an income increase and were spending more. According to a survey, the rural per capita living expenditure of the province in 2005 was 3,707.7 RMB, up 1,061.7RMB compared with year 2000, up 6 percent annually in the past five years after deduction of inflation. Also, China eliminated age-old agricultural tax early this year so that farmers can keep more returns.

Improving rural areas' public service

One key element holding back the growth of rural retail sales is that those regions are not covered by Medicare and education-for-all systems. Farmers need to save up a large portion of their income to pay for medical services and education.

In the past five years, Guangdong improved these two systems in rural areas. Up to 480 million RMB is used in rural medical services. In the next five years, the Medicare system will cover all rural residents. In education, all the children in the province's rural area, about 9.6 million in number, will enjoy nine years of free education.

Market Potential

Opportunities to invest in the rural market are hard to resist. According to a survey of 10,000 rural households by the State Ministry of Commerce of China, over 20 percent of them wanted to buy refrigerators, computers, washing machines, motorcycles, air conditioners and mobile phones. When Chinese rural household ownership rate of electric appliances goes up by 1 percent, 2.38 pieces of electric appliance are sold. Thus the retail market will bring jobs and revenues to the rural areas.

These trends will continue to help farmers increase their income, thus pushing up retail sales and the overall economy.

Editor: Yan