As the quality of the supply side picks up, the demand side needs to be looked at very carefully. Official China government statistics on retail trade are inaccurate with respect to both level and growth rate. In a soon-to-be-published analysis in the Urbis Retail Perspectives (Asia/Middle East edition), I found that China's official retail sales of RMB 12.5 trillion in 2009 are just over twice what they really are when measured according to conventional developed country non-automotive retail sales concepts.
The chasm between the official data and actual retail sales has really been blown wide open since 2009. The government says retail sales grew by 21.6% and 15.5% in 2008 and 2009 respectively. Really, they grew by more like 16.4% and 10.2%. The reason is that the government figures include accommodation, construction materials, agricultural machinery, cars and other items that wouldn't make it into our standard retail measures. Sales of some of these non-retail items grew exponentially during the past two years because they were used in government infrastructure projects initiated by the stimulus.
Still, you have to say that even China's actual retail sales growth rates during the past couple of years have been pretty impressive by international standards. The absolute levels though -- take them with a huge grain of salt.