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With China putting the emphasis on the quality, rather than speed, of its economic growth, there are high expectations for consumption to be the next driver, taking the place of exports and investment. The research institute of China's Commerce Ministry has just released a report indicating the shift will be smooth as domestic consumption is set to become single biggest engine of growth this year, for the first time in more than a decade. On the back of rising income and a growing willingness to spend, it predicts spending by Chinese consumers to increase by 15 percent.
The Chinese Academy of International Trade and Economic Cooperation is an institution under the Commerce Ministry. It says consumption in 2011 contributed 51.6 percent of the country's GDP, only 2.6 percentage points less than investment. The disparity was the smallest in a decade. This year, consumption is expected to continue to boom and surpass investment, becoming China's top economic-growth driver.
Zhao Ping, deputy director of Department of Consumption Economy Studies, CAITEC, said: "Consumption is characterized by its stability. As it becomes the top engine, that will help China's steady and fast growth."
Experts suggest the government stick to policies that boost domestic consumption to maintain momentum.
Zhao said: "For policies which have just been drawn up or are about to expire, the government should draft measures to follow up."
While urban residents will remain the major consumer group, spending by rural residents is forecast to grow.
Zhao said: "I think increasing farmers' income is the most important way to boost their consumption."
In particular, spending on furniture, construction and home furnishings is expected to grow by 30 percent as a large number of affordable houses come onto the market. Gold jewelry could also see a boost, as Chinese consumers buy up the yellow metal - not only to adorn themselves, but also as an investment to hedge against risks.