China’s government has launched a major drive to reduce domestic price inflation; however, inflation is largely concentrated in food and energy. In other sectors of the economy, pressure is continuing to be noted on prices. China’s apparel retail sales are expanding at a record breaking pace, with November sales growing 29 percent from the previous year. Total 2007 retail sales will increase 25 percent from last year, which indicates that at such a pace, the total volume of sales is doubling every four years or less.

Despite this demand, sales growth is still being strongly stimulated by aggressive pricing at the retail level. Building brand names in the domestic brands is occurring but is not an easy task. The apparel price component of the November consumer price index fell 1.4 percent, the sharpest drop since the January through February 2006 time period and the steepest one-month price decline for the year. The weakness in apparel prices also reflects the growing number of companies that are turning from exports to the domestic market.