China will become the third largest consumer market worldwide after the United States and Japan by 2020, with personal consumption exceeding 2.5 trillion U.S. dollars, according to the latest report released by global consultancy firm McKinsey.

In 2007, personal consumption in China amounted to 890 billion U.S. dollars which ranked as the fifth largest consumer market after U.S., Japan, UK and Germany.

The report notes that China's consumer demand is being released far more, and the consumption rate is low, amounting only 36% of GDP, equivalent to half the United States and two-thirds of Europe and Japan.

Since 1990, China's consumption share of GDP fell by nearly 15% and worsened after the global financial crisis. The report shows that household savings, household income and structural factors lead to the low consumption share of GDP in China.

Household savings rates remain high and keep rising, while the proportion of household income is declining. Meantime, investment-oriented, industry-intensive pattern of growth curbs consumption.

However, China has launched a package plan to accelerate consumption beginning the end of last year. McKinsey suggests Chinese government should boost personal consumption, improve social security system and increase the household income so that China's consumption share of the world will rise to 13%, with personal consumption over 50% of its GDP by 2025.

By People's Daily Online