Aiding purchasing power key to growth

China is planning major economic initiatives aimed at stimulating domestic demand by raising incomes, spending more on public infrastructure projects and creating an attractive investment environment, Zhang Ping, director of the National Development and Reform Commission (NDRC), said at a press conference on the sidelines of the annual two sessions on Wednesday.

Expanding domestic consumption will remain the country's key economic driver, which requires an increase in people's purchasing power that will be achieved by raising their income, Zhang said.

The central government's 2013 budget of 6.96 trillion yuan ($1.12 trillion) features spending increases in areas closely related to quality of life, with the goal of reducing citizens' need to maintain large savings and increasing people's willingness to spend.

The budget earmarks 1.57 trillion yuan for education, health, affordable housing, employment and culture.

The central government wants to spur domestic consumption as a means of weaning the country off its heavy reliance on exports and to protect against global economic downturns.

"Ever since 2008, the top leadership has realized how important domestic consumption is as a driving economic force," Sheng Hongqing, chief economist with China Everbright Bank, told the Global Times.

Consumption has played an increasingly crucial part in growth in recent years. In 2012, consumption contributed 51.8 percent of the growth in the GDP, overtaking direct investment for the first time.

Kong Qingping, executive board member of the China State Construction Engineering Corporation, as well as a member of the Chinese People's Political Consultative Conference (CPPCC), told the Global Times that China's economy growth model needs to be restructured if domestic demand is to rise significantly.

"The policies are critical. The economy should be boosted through entrepreneurial innovation, rather than those industries that cause heavy pollution and consume high levels of energy," Kong added.

"Innovation needs a relaxed environment and a lighter tax burden," Song Lin, chairman of China Resources and a CPPCC member, told the Global Times, adding that the tax system needs to be reformed.

Despite concerns over a growth model driven by investment, Zhang stressed that spending on infrastructure is still needed.

"The key is to choose the right direction," he said, adding that the government will focus on infrastructure that benefits the people, such as public housing, hospitals, schools and the renovation of dilapidated houses in rural areas.

Highways, railways and airports will be built in West China, where development lags far behind, Zhang said.

Premier Wen Jiabao said at the two sessions that government investment played a fundamental role in stimulating the economy.