The Chinese Government raised the strategic goal of building a new socialist countryside in 2006 and its financial expenditures have since increased in rural areas. Last year, the government expenditure on rural areas, farmers and agriculture totaled 339.7 billion yuan, 42.2 billion yuan more than that in 2005. The government is expected to devote over 391.7 billion yuan to rural areas and will continue to invest more in the future.

Aside from financial support, the Chinese Government is also working hard to improve the rural medical system, public health, education, employment and infrastructure construction in an effort to reduce farmers' expenses and increase their income. In this way, farmers can have spare money to consume more.

Ma Kai, Chairman of the National Development and Reform Commission (NDRC), vowed to control CPI growth to within 3 percent in 2007. This means the net income growth of farmers should reach 6 percent, and rural retail sales of consumer goods should reach 12 percent.

The NDRC decision is good news for the rural consumption market.

More opportunity for retail giants

Currently, shops in rural areas are managed by local farmers. Some major domestic retailers have already sensed the business opportunity in rural areas and have opened stores in villages with an increasing number each year.

Chang Xiaocun, an official with the MOFCOM, said one thing is foreseeable. That is, in a short time, the stores set up by those retailing giants will far outnumber those run by local farmers, as those giants have advanced management experience and have formed large-scale operations.

As for retailers, rural consumption is facing an unprecedented opportunity: On one hand, farmers' income has been rising steadily. On the other hand, the government has provided favorable policies for developing the rural consumption market.

Chang said encouraged by the favorable policy, retailers responded quickly. Since China opened its retailing market in 2005, multinational retailers have entered secondary cities and are looking to penetrate rural territory. In the near future, foreign and domestic retailers will stage a new round of competition in China's vast rural areas with great potential. The competition will in turn promote and boost the rural consumption.

Welcomed by farmers

Wang Hemin, Vice Minister of Commerce in charge of discipline inspection, went to two villages in Henan Province for inspection in February. Wang said his group walked passed 13 villages and checked over 100 rural stores.

Wang found that although rural stores are small in scale, they can nearly fulfill farmers' needs and there are some well-known food brands like Coca Cola. In some villages with poor transportation, if there is a shop nearby, they won't have to travel tens of kilometers to urban areas just for a bottle of vinegar.

Wang said those rural stores have rich returns. For instance, Zhechuan County is considered a state-level poverty-stricken area. The county has a population of 746,000 but has already formed a franchise store brand called "Wankelai."

Wankelai only had dozens of employees with sales revenue of about 1.7 million yuan in 2004. In 2005, Wankelai joined the shop project and has since opened altogether 362 outlets in villages with over 320 employees. Its total sales revenue last year reached 170 million yuan.