The toy section at a supermarket in Yichang, Hubei province. Consumption accounted for a record 60 percent of China's GDP in the first half of the year. (Photo/China Daily)
Value of goods and services dominates, but investment growth sees sharp decline
Consumption accounted for a record 60 percent of China's GDP in the first half of the year－a strong indication that the rebalancing of the economy has gained momentum.
But that also resulted in falling investment growth, due to a weak property market and manufacturing sector, and insufficient funding from local governments, experts said on Wednesday.
The consumption percentage has been closely watched by economists as China's growth model has become more reliant on investment over the past decade.
The contribution of consumption－or the value of good and services sold to people－to GDP increased to 50.2 percent in 2014, from 48.2 percent in 2013.
"A growing contribution from consumption is in line with the country's goal for economic restructuring, but it would be better if such a shift is based on growth of both consumption and investment," said Zhang Changchun, director of the Institute of Investment at the National Development and Reform Commission.
Both the growth rate of consumption and investment slid in the first half, however, with the pace of investment retreating even further.
Retail sales of consumer goods grew 10.4 percent year-on-year during the period, down 1.7 percent from the previous year.
Overall fixed-asset investment, excluding rural, rose 11.4 percent year-on-year in the six months, down 2.1 percent on the previous year, said the National Bureau of Statistics.
Zhang said the latest fixed-asset investment figure suggested that sluggish growth of investment is expected to continue in coming months, due to ongoing funding pressures on local governments.
Last year the State Council banned local government financing vehicles, or LGFVs, from raising debt on behalf of local authorities.
Although the central government has since eased curbs on bonds issued by LGFVs, Zhang said the funding levels available for municipal or provincial bonds still cannot meet the financing needed for these projects.
The government also accelerated its rate of project approval in the first half of the year by cutting red tape and strengthening supervision of local government capital allocation.
But some projects have been suspended or slowed down due to insufficient funding.
The NDRC said the pace of projects that have now resumed has accelerated since May.
To help cut costs and risks, the Ministry of Finance announced in March that local governments would be permitted to swap 1 trillion yuan ($163 billion) of high-interest local debt for new official municipal or provincial bonds.
Lian Ping, chief economist at the Bank of Communications, said such deleveraging of local debt and the promotion of public-private partnerships would be key for infrastructure investment growth in the second half of the year.
He said fixed-asset investment was mainly dragged down by slow growth in new housing development and in manufacturing investment.
Elsewhere, the NBS figures showed investment in the secondary industry, or the industrial sector of the economy dominated by the manufacture of finished products, declined by 0.4 percentage point year-on-year in the first half. Investment in mining, manufacturing, power and gas all saw slower investment growth.
Infrastructure continued to be a major driver of overall investment, rising 19.1 percent in the first half, up 1 percentage point from the first five months.
