The growth was mainly the result of the central government's decision made last year to continue to raise public servants' salaries, an official surnamed Zhang with the statistics bureau said.

"This is good news for China's consumer goods market, a key engine for the country's economic development which contributed about 60 per cent to the economic growth of 7.6 per cent during the first quarter," the source said.

Retail sales by urban residents rose 9.3 per cent year-on-year to 631.4 billion yuan (US$76.1 billion) during the first quarter.

"With more money in their hands, urban residents can increase spending on housing, cars, tourism and telecommunications. Money which is usually spent on food and clothing can now go towards other items," said Niu Li, a senior economist with the State Information Centre.

During the first two months of this year, residents, mainly from urban areas, purchased 106,000 cars, a year-on-year increase of 13.5 per cent.

Housing sold to urban residents grew 18.2 per cent year-on-year, accounting for 84.2 per cent of the total houses sold.

During the Spring Festival holiday, 51.58 million people travelled, an increase of 14.7 per cent.

Hu Shaowei, another senior economist with the centre, said the macroeconomic environment will be favourable for the further development of the consumer goods market this year.

But he also said the slow growth of rural residents' income, the widening gap between urban and rural areas, the structural problem in domestic production and the falling stock markets will have negative effects on consumer goods market.

(China Daily April 30, 2002)