Consumption edges ahead as most powerful economic growth engine

Updated: 2008-01-30 17:25

BEIJING - Consumption replaced investments as the most powerful engine of China's economic in 2007 for the first time in seven years, a senior official with the National Bureau of Statistics (NBS) said on Wednesday.

China's gross domestic product (GDP) grew 11.4 percent year-on-year to 24.6619 trillion yuan (3.43 trillion US dollars) in 2007. The 11.4 percent growth broke down into 4.4 percentage points driven by consumer spending, 4.3 from investments and 2.7 contributed by net exports.

Investments, consumption and exports are the troika pulling along any economy. In China, the share of domestic consumption in the GDP growth shrank to 39.2 percent in 2006 from 63.8 percent in 2000.

It was said the country's troika consisted of two strong horses -- high investment rate and exports, and a weak donkey -- domestic consumption. Worries were that a economy was in risk if it relied too much on investments and overseas markets.

But something is changing now.

China saw its consumer spending going up 16.8 percent to 8.92 trillion yuan in 2007 and beat investments as the biggest contributor to the GDP growth.

Analysts said the government's policy of powering consumption and curbing investments has led to the the dramatic shift, which was also supported by swelling income of residents.

Statistics show that the annual disposable income of urban residents surged by 12.2 percent to 13,786 yuan last year while that of rural residents climbed by 9.5 percent to 4,140 yuan.

"Our policy is to push up domestic consumption by raising the income of citizens, especially that of the low-income group. And the figures show the policy begins to yield results," NBS spokesman Li Xiaochao said on Wednesday.

Experts hold the troika of the economy will maintain a comparatively fast momentum in 2008 and consumption is expected to play a larger role in overall economic growth amid tight monetary policy and checked trade surplus increase.

"The growth of consumer spending is accelerating and the retail sales are predicted to grow by 17 percent in 2008," said Zhang Xinfa, chief macro-economic analyst with China Galaxy Securities.

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