Economy looks for consumers

PUBLISHED : Thursday, 02 March, 2006, 12:00am
UPDATED : Thursday, 02 March, 2006, 12:00am

Domestic consumption accounted for just 45 per cent of the nation's economic growth last year, more than 20 percentage points lower than the world average, despite repeated government calls for local spending to drive the economy.

Zhou Laizhen , a deputy director of the Ministry of Finance's enterprise department, said domestic spending's share of gross domestic product growth had declined from 53.4 per cent in 2004 and an average of 59.5 per cent between 1993 and 2003.

At a meeting in Yangzhou , Jiangsu , to promote the establishment of retail outlets in 'tens of thousands of villages', Mr Zhou said: 'The increase in domestic demand has averaged 8.6 per cent in recent years, but that is much lower than growth in GDP and investment.'

The mainland's gross domestic product grew by 9.9 per cent last year to reach 18.23 trillion yuan, boosted by a 25.7 per cent increase in fixed-asset investment and a 28.4 per cent rise in exports. With overcapacity and a huge trade surplus hindering sustainable national development, the mainland has shifted focus since 2003 to try to stimulate domestic demand, especially among rural residents.

But researchers say low incomes - particularly among farmers - and high expectations of future outlays for medical care, pensions and education have rendered the government's efforts to expand consumption impotent.

Urban residents' average disposable income rose 9.6 per cent to 10,493 yuan last year, while farmers had 3,255 yuan, or 6.2 per cent more, for discretionary spending.

Commerce Minister Bo Xilai told the meeting that igniting rural spending was a 'key issue of expanding domestic demand'.

The programme aims to have 100,000 chain shops and convenience stores in rural areas by the end of this year and 250,000 by the end of the next.

The minister said the programme would enable farmers to buy safer products and save on transport costs.

Shandong farmer Liang Hua , with three girls in school, agreed local shops could be convenient but would not entice him to spend more.

'How could I dare spend much while I have to borrow money every year to pay their tuition fees?' he asked.