BEIJING - The share of private consumption in China's gross domestic product (GDP) is expected to jump to up to 45 percent by 2015, compared with the present 36 percent, a senior economist said Monday.
The rising percentage of private consumption in China's GDP, still quite low compared with other major economies, would be a meaningful improvement that would benefit the world economy, said Stephen Roach, a professor at Yale University.
"A producer society must become more attuned to the needs and aspirations of a consumer society. China has both the wherewithal and the will to pull off this daunting transition," said Roach, who was addressing the China Development Forum 2011 in Beijing.
To boost the consumer purchasing power, the Chinese people's personal income must be raised, Roach said.
Roach pointed to rebuilding a social security net as the key step in dispelling consumers' concerns about their healthcare and life after retirement that have kept them from spending more.
Citing a recent research published by the International Monetary Fund, Roach said that the average saving rate for Chinese urban households had essentially doubled in recent years, rising from 15 percent in the early 1990s to 30 percent in 2009.
"If this precautionary saving persists, it will be exceedingly difficult for China to convert incremental growth in wage income into increased consumer spending," said Roach, who has long been an expert on the Chinese economy.
"I'm confident that China will make solid progress on the road to rebalancing its economy over the next five years," said Roach, referring to the 2011-2015 period.
He lauded China's 12th Five-Year Plan as a major milestone on the road to its development and widening prosperity.
"It sets the stage for the long-awaited transformation of a production-led economy into one that provides greater sustenance for its 1.3 billion consumers." he said.
The journey would be hardly easy, as challenges would be manifested in the form of domestic inflation, external demand shocks, or global rebalancing concerns, said Roach.
However, these are all problems that China can address and overcome. And China has put in place enormous momentum and foundation for this transformation, he said.