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The Chinese consumer awakens Add to ...

In the Tibetan monastery town of Xiahe, Gyelyanjia is visiting for a festival and taking the opportunity to do some shopping.

He has spent 20 yuan ($3 U.S.) at Ding's electrical appliance shop on a heat-belt, which he can fill with boiling water and strap around his waist to ward off the bitter winter chill on the Himalayan plateau.

The 66-year-old grins: "I already have a television at home. But I would like a washing machine and a fridge. I hope to buy those next year."

Timothy Geithner harbors similar hopes. The U.S. Treasury Secretary is counting on hundreds of millions of Chinese like Gyelyanjia to spend more and save less.

That way, Chinese factories would produce more for domestic consumption and less for export, helping to narrow the trade imbalances that are destabilizing the global economy.

Chinese consumption is, in fact, strong. It has grown by more than 9 per cent a year, after adjustment for inflation, over the past decade. China overtook the United States in 2009 as the world's leading automobile market. The real-estate market is on fire, swelling demand for appliances and furniture. China is No. 2 in sales of luxury goods.

There are no luxuries for sale in Xiahe, a rapidly developing town in the western province of Gansu and home to Labrang monastery, the largest outside Tibet.

Tibetans wrapped in long woolen robes, their hair falling in long plaits, crowd the broad pavement lined with shops along the main street leading to the sprawling monastery. Monks, taking a break from their prayers, chat on mobile phones on their way to the tea house or to buy a pair of handmade felt boots.

Renqing, 33, who like many Tibetans uses only one name, watches over her two-year-old daughter, sleeping in her stroller outside a shop. "Life is difficult for us. I only have enough money to feed and clothe my family."

Still, she admits, she has a washing machine, a fridge, a television and a computer at home. And, of course, a DVD player. But it's not enough. "If there's one thing I dream of having, it's Tibetan religious art. I wish I could buy statues to put in my home."

The Ding family are Hui minority Muslims. Mrs. Ding Yuying gestures around her store filled with freezers and televisions. "Business is up 50 per cent this year because the government has given a subsidy to farmers to buy electrical goods," she said.

Yet appearances are deceptive, at least through the prism of economic statistics.

Spending might be sturdy in China, but investment has been off the charts. As a result, consumption was just 35.6 per cent of Gross Domestic Product in 2009, from 46.1 per cent a decade earlier - and that was helped by a massive government stimulus to counter the global financial crisis.

The task for China's policymakers is to lift that proportion by boosting wages, speeding up urbanization and building a social safety net so people do not need to save so much for a rainy day.

"Consumption will be the story of the next five to 10 years, and because we're talking about a fifth of humanity, it will have a huge impact on global business," said David Gosset, director of the Euro-China Center for International and Business Relations at the China Europe International Business School in Shanghai.

Still, he doubted China's consumption share would reach the roughly 60 per cent rate of the European Union, let alone the 70 per cent rate of the United States. "The Chinese will never consume as we do in the West, especially in the U.S."

The opportunities for retailers are nevertheless mouth-watering, if they can adapt their sales methods to thousands of fast-growing towns across China where budgets and tastes are a world apart from the bright lights of Beijing and Shanghai.

Patrick Kung, Greater China chairman for Koninklijke Philips Electronics NV, sees huge growth in the coming decade in what he calls China's "emerging markets" - lower-tier towns and the countryside - while coastal cities will gradually become saturated.

"A smart company will be proactively investing and looking how to tap those markets," Mr. Kung told a conference organized by the European Union Chamber of Commerce in Beijing.

Scenting the potential profits, many multinationals are doing exactly that.

General Motors, the biggest overseas automaker in China, is busy rolling out affordable models aimed at smaller cities that it says could account for 60 per cent of its business within five years.

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