Domestic consumption takes driver's seat

Domestic consumption will be the main driver of China's economic growth this year, said a Ministry of Commerce think tank.

It is set to surpass government investment for the first time in a decade, said the Chinese Academy of International Trade and Economic Cooperation on Wednesday.

"The increasingly burgeoning income for Chinese individuals and their growing willingness to spend are major reasons behind the consumption growth," said Zhang Ping, deputy director of the Department of Consumption Economics at the academy and head of the team drafting the report.

The 2012 China Consumption Market Development report suggested that the Chinese government should maintain policies to continue expanding domestic consumption.

That includes lowering taxes on consumer and luxury goods, deepening income distribution reform, and continuing tax rebate policies.

Government investment has long held a leading role in stimulating the nation's economy, along with domestic consumption and exports.

However, the outlook for government investment this year is not positive, Zhang said.

Economic crises in other countries have also battered exports.

In 2012, China's domestic consumption will grow by 15 percent, the report predicted.

Such rising domestic demand will create opportunities for China's trading partners, according to Stephen Green, minister of state for trade and investment of the United Kingdom.

"In China, everyone recognizes that the growth in the past years has been led too much by exports and investments, not enough by consumption and domestic demand," the UK trade minister said.

More domestic demand will lead to more balanced trade, and UK exporters will have more chances to sell to China as Chinese middle-class consumers want the same branded goods as everywhere else, from motorcars to Burberry and scotch whisky, said Green.

The Chinese economy is expected to grow by 7.5 percent this year.

Consumption key

Urban residents will remain the major consumer group in China, despite the faster growth of per capita incomes for rural residents, said the report.

Consumption of furniture, construction and house decorating materials will grow nearly 30 percent in 2012 as a large number of affordable houses come into operation, it said.

Vice-Premier Li Keqiang said last weekend that expanding domestic consumption is a strategic point for economic development, especially this year, as there is slack in international markets.

Due to the European debt crisis, China's exports were grim during the first two months of this year, and February also saw the largest trade deficit in the past two decades.