"Consumption is a key but difficult area for China to expand domestic demand and retains the greatest potential for China's sustainable economic development," Yao Jian, spokesman for the ministry, told the conference. "The ministry will expand commodity consumption during the integration of rural and urban areas, while boosting the upgrading and innovation of consumer products. What's more, consumption of services, especially in medium-sized and large cities, will be a key point for enlarging consumption in the near future."

China's consumption expenditure accounted for a low percentage of the GDP compared with the average level in developed economies, while the 14.3 percent growth of retail sales in 2012 suggested a "very challenging" prospect for retail sales in the coming two years, according to a report released by the ministry on Thursday.

"In line with the drive to restructure the economic growth model and expand household consumption, we must speed up the establishment of a suitable modern retail network and significantly enhance the contribution of consumption to GDP growth," the report said.

Wang from the ministry added that the retail industry faces some outstanding challenges, including unbalanced retail networks in rural and urban areas, fast rising operational costs, obsolete operation models as well as insufficient services for logistics, online payment and financing.

"Costs increased fast for the retail industry in recent years and rents and wages are the major contributors," Guo from the association said.

In recent years, rents increased 21 percent annually for large retail chains monitored by the association, while labor costs rose 20.5 percent annually.

The total sales of the top 100 retail chains accounted for 9 percent of the retail sales in 2012, compared with 11.2 percent in 2011, marking the first decrease since 2003, while online retail sales accounted for 6.3 percent of the retail sales last year, up from 1.2 percent in 2008, according to the report.

lijiabao@chinadaily.com.cn