by Xinhua writer Chen Wenxian
JERUSALEM, Sept. 22 (Xinhua) -- Income hike, lax credit and employment rise are driving Israel's continued growth of private consumption, thus creating greater market potential for imports of Chinese goods which are growing fastly.
Due to Israel's relatively single commodity structure and high prices, consumers in this Jewish state are hunting for commodities with good quality but low price. In this sense, Chinese commodities are becoming more and more popular with Israelis, experts said.
Indeed, statistics showed that Israeli imports of Chinese goods surged to 4.4 billion U.S. dollars in the first eight months, a sharp increase of 11 percent from last year.
Now, China is the second largest origin of Israeli imports, second only to the United States. Chinese goods now account for 10 percent of total Israeli imports.
Israel's private consumption growth is supported by an increase in imports, especially the civilian goods which amount to more than 72 percent of total imports, a spokesperson of the Israeli Ministry of Finance told Xinhua.
"In this sense, China is a significant contributor to the increase in Israeli private consumption, as it is the second largest origin of imported goods to Israel," the spokesperson said on condition of anonymity.
The steady growth of Israeli economy over the last 15 years has led to the continued increase in its private consumption, which reached 175 billion dollars in 2016, accounting for about 55 percent of Israel's GDP.
In return, private consumption plays an important role in driving Israel's economic growth. It is in fact now the main engine behind the economic expansion, the spokesperson said.
The salary increase, rising employment and super low interest rate have resulted in a rapid widening of private consumption, said a report by the Israeli think-tank Taub Center for Social Policy Studies in May.
In the second quarter of this year, private consumption expenditure saw an annual rate growth of 6.5 percent.
"What supports the market is the ability to spend more money and buy more products," Gilad Alper, head of Research at Excellence Nessuah Trust Company and member of the Economic Advisory Board of the Israeli Minister of Finance, told Xinhua in an interview.
"The unemployment level in Israel is very low. The rate of labor participation has risen in the last decade and brought more people into the work force," he said.
According to the latest figures released by Israeli Central Bureau of Statistics, the unemployment rate in Israel was only 4.1 percent in August, while the employment rate at the age of 25-64 hits 76.6 percent.
Meanwhile, the monthly wages for Israeli employees averaged about 3,000 U.S. dollars in June, an increase of 3.6 percent year on year.
The low interest rate and strong local currency Shekel are also main factors driving the increase of private consumption.
In August, the Bank of Israel decided to maintain the interest rate at 0.1 percent for September and October. Since March 2015, Israel has kept the record low interest rate for consecutive 30 months.
Low interest rate allows ordinary people to take loans easily and business owners to expand investment at a low cost, thus giving them the ability to spend more. And a strong Shekel encourages consumption through lower cost of imports, Alper noted.
"We see in recent years a significant increase in consumer loans and until today, this trend is clearly continuing. In a low interest rate period, people do not keep their money in the bank, but they want to use it and spend it," Amalya Duek, a finance and consumer affairs correspondent for Israeli Channel 2 news, told Xinhua.
Though private consumption in Israel has been growing rapidly for quite some time, there is still room for its continued growth, as its share in the total GDP (55 percent) is still low compared to the average level among the member states of the Organisation for Economic Cooperation and Development (61 percent).
The Israeli Ministry of Finance's medium-term forecast indicates an expected private consumption growth of 2.9 percent and 3.7 percent in 2017 and 2018, respectively.
However, the average disposable income per capita in Israel is at the last place among the 34 OECD countries, said the report by the Taub Center for Social Policy Studies.
Figures from the Central Bureau of Statistics show that as of the end of July, the current household monthly pre-tax income in Israel averages about 5,300 dollars and after-tax income 4,380 dollars.
Though the CPI growth in Israel remains at low level, only 0.3 percent in August, the cost of living in Israel is very high due to its structural reasons and economic policies, like taxes, said Alper.
That is why commodities with good quality and cheap price, like those imported from China, are loved by consumers in Israel.
"The Israelis are so accustomed to the fact that the prices here are significantly higher compared to the world, that every time they have an opportunity to buy something for cheaper, they grab it," Duek said.
In the eyes of experts, though Israel is a small country, Chinese commodities still have market potential in Israel.
"There is a great will in Israel to do business with Chinese companies and with China, because they recognize that China is the future," Alper said.
He noted that more and more Israelis are now learning Chinese, as they acknowledge that there are big opportunities in terms of Israel's growing trade and economic ties with China.
"In the private sector, there is a lot of will to work with Chinese companies," Alper noted.
