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McKinsey: Consumers Will Be New Powerhouse of Chinese Economy
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China's economy is on the verge of a major transition which will see consumers begin to play a much greater role, says a report by international consultants McKinsey & Company.

The report is included in the official publication of the Boao Forum for Asia (BFA) 2007 annual conference, which began today in Boao, a small town in China's tropical Hainan Island.

The McKinsey Global Institute's (MGI) analysis of 20 years of data suggests that over the next two decades, the Chinese economy will move away from its historical investment-led growth model as consumers grab the driving seat in the economy.

The report says that the income of Chinese residents has traditionally lagged behind GDP growth but will eventually begin to catch up.

As it develops, China will rebalance its economy: marginal returns on investment will begin to decline, creating a natural brake on investment growth, and domestic spending by consumers will start to drive growth.

McKinsey estimates that consumption will rise to 41 percent of GDP by 2015, and to 45 percent by 2025.

(Xinhua News Agency April 21, 2007)

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