2013-03-10 15:58:37 - China will focus on consumer led growth in an attempt to bolster the economy from within, and it is unlikely that China will experience less than 8% average growth over the next decade – Sonata Financial
China’s new rulers will focus on consumer led growth in an attempt to narrow the gap between rich and poor. China's total trade should grow by about 8% this year, outpacing last year's 6.2% gain, said Commerce Minister Chen Deming on Friday.
China admitted earlier this year there was an urgent need for reforms to narrow an income gap that is now one of world's widest and at levels that analysts say sparks social unrest, despite three decades of blistering economic growth that have lifted hundreds of millions of people from rural poverty.
Beijing also announced an 8.7 percent rise in the 2013 domestic security budget to 769.1 billion yuan ($128 billion), exceeding military expenditure for the third year in succession.
Premier Wen Jaibao said increasing consumption was the key to unlocking the full potential of domestic demand in the economy of 1.3 billion people by reducing excess, inefficiency and inequality. This, he said, would deliver growth of 7.5 percent in 2013 - a level China barely beat in 2012 when growth eased to its slowest pace in 13 years, expanding by only 7.8 percent.
"To expand individual consumption, we should enhance people's ability to consume, keep their consumption expectations stable, boost their desire to consume, improve their consumption environment and make economic growth more consumption-driven," Wen said.
"I'm more optimistic about this year's trade," said Commerce Minister Chen Deming. Mr. Chen gave no estimate for exports or imports for this year, however exports climbed 7.9% in 2012 while imports were up 4.3% in a year marked by economic sluggishness for many of China's key trade partners.
A gradual recovery in the global economy is widely expected to help China's trade this year, and China announced on Friday that its February exports surged 21.8% over last year's level, far exceeding the expectation of a 5% rise.
The commerce minister also said that currency depreciation by other countries would have an impact on the exports of emerging nations, including China.
Other Chinese officials have aimed harsh criticism at Japan for letting the value of its currency slide on foreign exchange markets. Mr. Chen said he wasn't referring only to Japan, and suggested that the U.S. and other developed countries that also employed loose monetary policies were a source of concern.
"Inflation caused by quantitative easing is what concerns me most," he said, referring to the "super loose" monetary policy that the U.S. has used to boost domestic economic growth.
Imported inflation would mean higher prices for China and that could ultimately affect the nation's exports.
Despite its ranking as the second-largest economy in the world after three decades of stellar growth, China remains an aspiring middle-income country divided by inequality and dependent on state-backed investment.
About 13 percent of China's population still lives on less than $1.25 per day, the United Nations Development Program says average urban disposable income is just 21,810 yuan ($3,500) a year.
On the other hand, according to the latest reckoning by Forbes, China has 122 (USD) billionaires. A rival list in the Hurun Report says China has 317 billionaires accounting for 20% of the world’s richest individuals.
Meanwhile experts estimate that China will have 167 million "mainstream" consumer households by 2020 – each with annual disposable income of between $16,000 and $34,000 - more than 10 times the 14 million, or 6 percent, who currently fit that definition. There will also be 120 million households with $6,000-$15,999 of spending power.
Regardless of whether expert projections are accurate or overzealous, it is no secret that China’s domestic economy is rapidly growing and evolving into a global powerhouse. Though there are many hurdles to overcome, it is unlikely that China would experience less than 8% growth average over the next decade.