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China lowers GDP target for quality growth

Updated: 2012-03-12 14:49

(Xinhua)

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China which has been striving to wean off its reliance on external demand has put more emphasis on domestic consumption as its engine of growth this year.

According to Premier Wen, expanding domestic demand, particularly consumer demand, which is essential to ensuring China's long-term, steady, and robust economic development, is the focus of economic work this year.

Government policies will be improved to encourage consumption, and social safety net will be expanding, Wen said, "We will vigorously adjust income distribution, increase the incomes of low- and middle-income groups, and enhance people's ability to consume."

Boosting domestic consumption is crucial to China's future. Wen promised increased spending on health care and social services to free up disposable income.

Wen said the government would support more paid vacation, expanded consumer credit and greater buying options to help people spend more.

The emphasis will be the low and middle-income group, understood Fu Qiping, a NPC deputy from Zhejiang Province.

He said, due to lack of wealth accumulation, this group of people's consumption level is low, thus failing to drive the consumption demand in the short term. "But in the long term, they have huge consumption potential," Fu added, "the key is to let this group of people have the ability to spend and dare to spend."

According to the work report, the central government has prepared its budget to meet the requirement that spending on education accounts for 4 percent of GDP.

The report also promised that, by the end of the year, the country will have achieved full coverage of the new old-age pension system for rural residents and the old-age pension system for non-working urban residents.

Qiao Hong, chief economist for Greater China, Morgan Stanley, said that more government spending in social security programs will help people feel more confident about spending, rather than saving.

The government should also work to close the enlarging income gap and raise the general income level, which will also benefit consumption, Qiao said.

"As the external market shrank, expanding domestic demand and shifting to a consumption-led economy has become an inevitable choice for China," said Chi Fulin, head of the China (Hainan) Institute for Reform and Development.

Premier Wen said in the report that industrialization, urbanization and agricultural modernization will help create huge potential demand.

"Progresses in urbanization is the ultimate way to increase farmers' income and expand consumption in the rural market," said Zhuang Jian.

Steven Dunaway, a scholar with the New York-based think tank the Council on Foreign Relations, told Xinhua that the external economic environment that China will face over the next decade will be substantially less favorable than what it faced during its high growth period from the mid 1990s.

"In these circumstances, the best thing for China to do is to concentrate on development of its domestic economy and domestic demand," he said.

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