Sow new seeds for consumption
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As China races to accomplish the goals set in the 11th Five-Year Plan that began in 2006 and ends this year, many of the nation's policymakers and researchers are busy mapping out the guidelines for the next five years. At this critical moment, it is heartening to see that Chinese think tanks have reached a consensus that the nation is in dire need of a series of reforms to foster a consumption-led economic model. I believe they are aiming in the right direction.
A survey done recently by the China Institute for Reform and Development on more than 350 staff members of government think tanks, research institutions and large companies points out that China needs to reform its development model in the 12th Five-Year Plan (2011-15). And ideally, the next five years after 2010 will build a foundation for the country to launch its second round of reforms since the first round in 1978, to aid in the transition from a planned economy to a market economy.
Although in the past few years China's GDP (gross domestic product) has grown dramatically, with a GDP growth of 8.7 percent amid 2009's financial crisis and a likely 9-percent growth this year, many economists said they believe China's growth is not sustainable and its quality is substandard. Reforming the development model is what we need to ensure sustainability, and social equality.
Before going into details of what to do, let me first sketch out the desired effects of the 12th Five-Year Plan with a few numbers: In 2015, household consumption will account for 45-50 percent of GDP compared to the current 35 percent; 50 percent of the country's GDP will come from the service sector instead of the current 40 percent; more than 55 percent of China's population will be urbanized, compared to the 45.7 percent in 2008; and per capita GDP will reach $5,000, instead of $3,000 in 2008.
The way to achieve this goal is to base our sustainable growth in consumption - the coming five years are critical for steering toward this path. Chinese policymakers should waste no time in addressing the country's excessive dependency on investment and exports for growth. Instead, they should focus on the population of the impoverished, offering them better social security and higher incomes so that they will be more willing to spend. If household consumption accounts for 50 percent of GDP in 2015, we will be able to say that the country is basically a consumption-driven economy. Right now, there are already signs that Chinese consumers are demanding more than just food and clothing. They are spending more on health, education, housing and durable goods, such as cars and electronic appliances. China is now at a turning point to spur growth in domestic spending.
However, a consumption-driven growth will not come until we have a stronger service industry that has equal accessibility for urban and rural residents.
