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China’s economic growth mode must change

(chinadaily.com.cn)
Updated: 2010-11-06 17:40

Guidelines for China’s development over the next five years approved by the newly concluded Party plenary give priority to the transformation of the economic growth mode, a scholar in economics said at a forum in Beijing, Oct 22.

Wei Jie, a professor from the School of Economics and Management, Tsinghua University, said the focus of the transformation lies in the shift from being export and investment-oriented to domestic demand and consumption-oriented.

“Boosting the domestic demand tops the 10 tasks listed in the proposal for formulating the 12th Five-Year Program (2011-2015), and the key points to realize it are how to promote consumption,” Wei said.

The major contribution to the GDP growth in 2007 came from exports, which climbed to 40 percent. The huge imbalance in payments pulls China into a very dangerous situation, meaning the former economic growth pattern relying on export and investment should be changed to expanding domestic consumption, he added.

China has sustained an annual growth of 6 to 7 percent for a decade, and state revenue is growing even faster than that, at 25 percent a year, while individual income growth is lagging. In order to promote consumption, the income distribution system must be improved.

Wei also offers five ways to seek a new phase of economic growth boosted by consumption: reducing personal and enterprise taxes, increasing the tax rebate, raising the threshold of personal income tax, state shouldering more responsibilities in collecting social security funds and increasing farmers’ income as well as residents’ in rural areas.

“Large increases in majorities’ income will guarantee the success of China’s transformation of economic development pattern. I hope this will come true during the next five years,” Wei Jie said.