One scholar optimistically says that China's consumer spending which has been lifeless for dozens of months could be undergoing a fundamental change. The combined efforts of the government's policies on interest rates, taxes and prices could finally be paying off.

Since 1996, the central bank has cut interest rates seven times. The tax on interest rates has dropped the increase in personal savings from 18.5% last June to 5.5% this May.

In the first five months of this year, savings deposits totals increased 284 billion yuan, 275.8 billion yuan less than the same period last year. Large amounts of capital flowed from the banks to consumption and investments.

Since last October, China has increased the salaries of its civil servants, raised the social welfare standards for low-income families in cities and lengthened vacations to stimulate consumer demands.

During the seven-day long vacation for International Labor Day May 1, retail sales and the service industry's earnings rose 22% and 20% respectively, the highest since 1996. At the same time, reforms in housing, education, medical care and elderly care systems as well as adjustments in telecom fees, cuts in electricity costs and more people traveling all contributed to the increase in personal consumer expenditures.

According to a poll by the National Bureau of Statistics, approximately 70% of people plan on buying a home. Last March, the telecommunications pricing structure was adjusted and telephone installation fees dropped. That month, the number of new telephone customers in China increased by 1.92 million. There are currently 56 million cell phone users in China, several times more than there were last year. During the International Labor Day holiday, more than 47 million people took the opportunity to travel and spent 18 billion yuan.

Of course, it should be pointed out that the rebound in consumer spending is not stable. There are several key problems that affect consumer spending, which have not been addressed.

One is the gap between the increase in incomes of rural and urban residents. In the first quarter of this year, the income of rural residents grew by 1.3%. Although the average income for urban residents in the month of May was 1,752 yuan, a 7% increase, most people do not believe that their income will increase. 80% of people in the low to mid-low income bracket felt that their income would decrease.

Two, there are still many policies which hamper consumption. There are still factors in the system that makes the consumption environment less than ideal. Compared with the people's income level, housing prices are still high everywhere. Many work units charged with administering the national housing policy give huge discounts on the price of housing, thus many employees are unable to purchase the homes at cost price or receive housing subsidies. There are all kinds of government interference which restrict the aviation and telecom industries from adjusting prices themselves. An assortment of "management" and extra fees pile on the burden consumers face in purchasing homes, cars or agricultural production material.

Three, the water, electricity and gas infrastructures are outdated. In the sweltering summer, in many cities the air conditioner and microwave cannot be turned on at the same time. In rural villages, most electrical networks are old, electricity fees high, and many families don't have running water. Four, the social welfare system is not complete. Retirement, unemployment, medical care and elderly care are all problems which need to be addressed.

The crux to increasing the incomes of rural and urban residents is developing the economy and increasing employment. This is a long-term goal.

China needs to continue restructuring its economy, reform its old economic system, create more investment opportunities to give consumers stable income expectations. In addition, Chinese everywhere need to strive to build a better social welfare system, quicken the pace on completing China's infrastructure.

(People's Daily)