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Consumers must spend, not save, forum is told

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Home-grown boost to economy now essential, say experts

Beijing needs to strengthen its education, medical, pension and other social welfare systems to encourage people to spend instead of focusing on saving for the future, the nation's top economic planner said yesterday.

Ma Kai , head of the National Development and Reform Commission, told the China Development Forum in Beijing the central government must switch from relying on investment and exports to drive the economy, and focus more on stimulating domestic consumption.

According to the China News Service, investment on the mainland rose to 44.8 per cent of gross domestic product last year, from 36 per cent in 2000, while consumption fell to 50.7 per cent of GDP last year from 62 per cent five years ago.

'This growth model of relying on investment and exports will increase the instability of economic growth, even though it can realise fast expansion in a short period of time,' he said.

'We need to adjust the distribution of income and raise the income level of urban residents. More important is that we must improve the lot of rural people and low-income people so that they are able and willing to spend more.'

He said Beijing needed to foster growth based on innovation and technology instead of solely relying on cheap land, low wages and exploitation of resources. Advantages such as cheap labour would lose their effect as businesses were forced to spend more in other areas, such as the rising cost of production and environmental protection.

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