China's domestic consumption has replaced investment to become the biggest driver of economic growth for the first time in seven years.
Last year, domestic consumption contributed 4.4 percentage points to the 11.4-percent increase in the nation's gross domestic product, compared with 4.3 percentage points of investment and 2.7 percentage points of net exports, said China Securities Journal yesterday, citing unidentified official with the National Bureau of Statistics.
Data released earlier showed the nation's retail spending rose 16.8 percent to 8.92 trillion yuan (1.24 trillion U.S. dollars) in 2007, up 3.1 percentage points from a year earlier.
Fixed asset investment expanded 24.8 percent to 13.72 trillion yuan, 0.9 percentage point higher compared with a year ago, while the trade surplus grew 47.7 percent to 262.2 billion U.S. dollars, 26.3 percentage points slower in pace.
"The rise of domestic consumption is the result of many years of efforts to support spending while curbing investment, with a goal to reduce dependence on external factors," said Ba shusong, a researcher with the State Council Development Research Center.
Since the Asian financial crisis in 1997, China has earmarked a strategy to reduce reliance on investment and exports and turn to consumption through tax cuts, minimum wage rises and improved education, welfare and health care.
But investment had still remained a leading driver of economic development despite various efforts in the past decade.
In 2006, investment contributed 4.6 percentage points to GDP growth, 0.3 percentage point higher than consumption.
Zhang Xinfa, an analyst with China Galaxy Securities Co, estimated consumption will contribute more to the economic growth in the future.
However, some analysts suggested that higher consumption growth does not mean a weakened investment sector.
"In five years at the minimum, investment and exports will still be major contributors to China's economic growth, at least of parallel importance to consumption," said Li Maoyu, an analyst with Changjiang Securities Co.
Last year, disposable income for city dwellers jumped 17.2 percent to 13,786 yuan and earnings for rural households rose 15.4 percent to 4,140 yuan, according to official data.
Source: Shanghai Daily
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