'Follow consumption-led growth'

08:32, April 12, 2010      

Email | Print | Subscribe | Comments | Forum 

China's continued economic growth hinges on domestic consumption as the major role played earlier by exports and investment will decline in future, a Chinese leader and experts said during the annual conference of the Boao Forum for Asia (BFA).

As the world's third-biggest economy, China must pursue a consumption-driven economic growth model, Xi Jinping, China's vice-president, said.

"We must develop the economy mainly by relying on the domestic market and attach great importance to domestic demand, especially consumption demand, in driving economic development," he said in a speech during the opening ceremony of the BFA last Friday. Fan Gang, the director of the National Economic Research Institute of the China Reform Foundation, pointed out that the "shyness" in consumption is in fact not about "spending". Rather, the crux lies in the relatively low income of the Chinese people.

"It's not that people are reluctant to spend their money. It's just that they don't have any," he said at a sub-forum on the conservative attitudes shown by Asian nations toward consumption.

One way to achieve the goal is to reduce the average Chinese citizen's income tax.

"We should not only reduce tax on low-income earners, but those middle-income earners," as they are the primary force driving domestic consumption, he explained.

In addition, the low-level of social security made people feel reluctant to spend money. The government's investment in the social security system has achieved progress but remains low, Ma Xiaohe, vice-president of the Academy of Macroeconomic Research, National Development and Reform Commission, told China Daily.

Countries in Europe contribute about 50 percent and the US spends 30 percent of their fiscal income on social safety and social welfare expenditure, whereas it only accounts for less than 11 percent of China's fiscal income.

It is necessary to establish a mature mechanism to facilitate the growth of laborers' income and rebalance the distribution of income, Ma said. "China's economy is growing at about 10 percent each year, but people feel that they are not getting enough benefits in their daily life," said Chen Zhiwu, a professor of finance at the School of Management, Yale University.

The so-called phenomenon of "wealthy state, poor people", where the wealth is gradually concentrated in the hands of the state, has become increasingly relevant, Chen said.

Apart from economic considerations, Chinese people's unwillingness to spend could also be partly attributed to cultural influence, especially Confucianism, which emphasize saving and thriftiness, said the experts.

The consumption habits will gradually change as the younger generation born in 1980's and 1990's grow up. This generation has adopted some aspects of Western culture and become more willing to spend money to build a comfortable life, Fan said.

Source: China Daily

(Editor:黄硕)

  • Do you have anything to say?

双语词典
dictionary

  
Special Coverage
  • Premier Wen Jiabao visits Hungary, Britain, Germany
  • From drought to floods
Major headlines
Editor's Pick
  • On Sept. 26, a resident passes by a flower terrace decorated for the coming National Day. (Xinhua/Hang Xingwei)
  • The photo, taken on Sept. 26, shows the SWAT team ready for the joint exercise. (Xinhua/Wangkai)
  • Two metro trains in Shanghai collided Tuesday afternoon, and an identified number of passengers were injured in the accident, the Shanghai-based eastday.com reported. Equipment failures were believed to have caused the crash on the Line 10 subway, Xinhua quoted local subway operator as saying.
  • An employee at a gold store in Yiwu, located in east China's Zhejiang province, shows gold jewelry on Monday.(Xinhua/Zhang Jiancheng)
  • Tourists ride camels near China's largest desert lake Hongjiannao in Yulin, north China's Shaanx Province, Sept. 24, 2011. Hongjiannao is shrinking as a result of climate change and human activities, and may vanish in a few decades. Its lake area, which measured more than 6,700 hectares in 1996, has shrunk to 4,180 hectares. Its water level is declining by 20-30 centimeters annually and its water PH value has risen to 9.0-9.42 from 7.4-7.8. (Xinhua/Liu Yu)
  • Actors perform royal dance at the Gyeongbok Palace in Seoul, Sept. 27, 2011. A ceremony commemorating the 38th South Korea Sightseeing Day was held in Gyeongbok Palace on Tuesday. (Xinhua/He Lulu)
Hot Forum Discussion