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China Daily Website

Double drivers for economy

Updated: 2012-12-12 08:31
By Zhang Monan (China Daily)

To maintain competitive advantage, as well as boosting domestic demand, manufacturing must be upgraded

China is realizing a transformation from an external demand-driven economy to a domestic demand-driven, especially consumption-driven, economy to maintain its sustainable development, and the ever-increasing domestic consumption will be an important driving force for the country's economic growth.

However, consumption alone will not be enough to sustain China's development and retain its threatened competitiveness. International experience shows that an economy founded on consumption alone will be unable to maintain sustainable development. So China should maintain a strong manufacturing industry to bolster its consumption.

In the report delivered by Hu Jintao, the former general secretary of the Central Committee of the Communist Party of China, to the 18th National Congress of the CPC, the country aims to double its gross domestic product and the per capita incomes of urban and rural residents from the 2010 level by 2020. These goals, if realized, will help release 64 trillion yuan ($10.20 trillion) of purchasing capacity. According to the Boston Consulting Group, China's domestic consumption will rise to 50 percent of the domestic consumption in the United States by 2015 and 80 percent by 2020 if its GDP achieves a 7 percent growth rate year-on-year, assuming that the US maintains a 2 percent GDP growth year-on-year.

While statistics show that China's trade surplus declined in 2011 for a third straight year, with its proportion to the GDP declining from 10 percent in 2007 to 2.8 percent, the country's import volume is expected to grow by 27 percent year-on-year from 2011 to 2015, five percentage points higher than its exports during the same period. Its total import value over the next five years is expected to exceed $10 trillion. Such an enormous market means huge opportunities for foreign capital and this also explains why many transnational corporations have shown a strong desire to increase their presence in China since the global financial crisis.

According to a survey conducted by the Development Research Center of the State Council in May, transnational companies not only regard China as an important market, they also view it as a research and development base and an important export destination. It is also seen as an important base for services, product assembly, low-cost manufacturing, as well as an important source of financing.

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