Strong China retail market still being driven by cosmetic sales

By Simon Pitman

- Last updated on GMT

Related tags: Economic growth, Economics

Despite global financial markets being in turmoil the Chinese
retail market is continuing to speed ahead. Indeed, due in
part to strong sales of cosmetic and personal care products, the
World Bank has raised is forecast for the country's economic growth
by nearly 1 per cent.

Economic growth has been hovering at around the 10 per cent market for more than two years now, fuelling a huge boom in consumer spending that has given a major boost to the fast moving consumer goods sector. However, with financial turmoil mounting on world stock markets, mainly due to perceived weaknesses in the US economy, many industry observers have been indicating that there could soon be a knock on effect for the economy in China. Not so, according to the World Bank, who only yesterday raised its growth predictions for what is already the world's fastest growing economy from 10.4 per cent to 11.3 per cent annual growth. So far strong investment levels and high demand for Chinese exports has helped to sustain this economic growth, bolstered by a growing retail sector. However, economists believe that in the future a slight reduction in the level of both investments and exports will be offset by even stronger growth in retail sales. In fact, on the same day as the World Bank revealed its increased forecasts for economic growth in the country, the Chinese government unveiled new figures showing that retail sales are continuing to increase. The figures for August showed that retail sales grew by 17.1 per cent, an increase on the 16.4 per cent average growth rate shown for the segment in the 12 month period up to July of this year. Although some of this increase in sales was attributed to an increase in inflation - up from 5.6 per cent in July to 6.5 per cent in August - the government statistics also revealed that there were strong gains in durable goods and discretionary purchases. The statistics highlighted particularly strong growth for cosmetic product sales, as well as jewellery and household electronic goods - categories that have consistently grown at a break neck speed in the past few years. Latest statistics from market research provider TNS suggests that current growth in the market for cosmetics and personal care goods is set to make it the world's largest market by 2009, when it is expected to oust the US market from the number one position. Indeed, TNS says that the market is estimated to have grown by 17 per cent since 2005, to reach $2.2bn by the end of 2006, growth they predict will be sustained over the next two years. Economists back this prediction, forecasting that sales for fast moving consumer goods should remain robust for the medium-term, helping to maintain the country's title as the world's fastest-growing major economy.

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