China's retail sales of consumer goods are predicted to surge 13 percent to hit 8.6 trillion yuan (1.075 trillion U.S. dollars) in 2007, said the Ministry of Commerce on Tuesday.

Retail sales reached 6.21 trillion yuan in the first 10 month of this year, up 13.6 percent over the same period last year, the biggest year-on-year increase since 1997.

Influenced by spiralling fixed assets investment and growing exports, markets for production materials and oil products maintained fast growth, the report said.

Sales of production materials amounted to 14.4 trillion yuan in the first 10 months, up 18.2 percent. Sales of refined oil grew 45.8 percent.

Rural markets have been expanding rapidly this year, with retail sales of consumer goods reaching 2.01 trillion yuan in the first 10 months of the year, up 12.4 percent, which was 1.4 percentage points higher than the previous year.

The gap in the growth rates between urban and rural retail markets dropped from 1.9 percentage points to 1.8 percentage points.

The report predicted that China's prudent macro-economic policies will keep the economy growing at a steady and fast pace in 2007, creating a favorable situation for the development of the country's commodity market.

The rural market is expected to continue expanding as infrastructure improves. Domestic consumption is likely to increase as a result of the government's measures aimed at fairer income distribution.

The report said the global economy and trade, which are predicted to grow by 4.9 percent and 7.5 percent respectively in 2007, will also boost China's commodity market.