New | Domestic consumption set to become China's main economic driver

China's consumption is on track to replace investment as the mainland's main engine of economic growth, making a long-promised rebalancing of the economy a reality.

Dubbed the "third engine" of the economy until now, data from the National Bureau of Statistics yesterday revealed that consumption contributed 51.2 per cent to gross domestic product growth in 2014, up from 48.2 per cent a year ago.

"China's consumption on average is expected to outpace investment and GDP with a growth of 7 to 8 per cent in real terms in the next few years," Wang Tao, chief China economist at UBS told the South China Morning Post.

"Its share in GDP should rise by another 3 to 4 percentage points by the end of 2020."

Years of double-digit percentage point rises in household income are finally tipping the balance towards the domestically driven growth that Beijing has been striving for, to replace fickle foreign demand for exports and inefficient investment spending that fuels property bubbles, as the key underpinning to the economy.

Total retail sales were 26.2 trillion yuan (HK$32.7 trillion) in 2014, up 11.9 per cent in nominal terms - the level which has held fairly steady for the past couple of years.