| From 1978, Mainland China has been adhering to the policy of market opening and gradually solving the problems in its economic system in the pursuit of economic growth. In the face of the new era for the 11th five-year economic development plan, China is facing a formidable task of how to stimulate domestic demand to sustain further growth of the economy.
In recent years, growth rate for fixed-asset investments has been much higher than GDP (gross domestic product) growth, boosting the share of aggregate investments in GDP to near 60%. Continuous pickup in investment rates has increasingly highlighted the contradiction between investment and consumption in fundamental economic structure. Meanwhile, exports share in GDP has also increased to a level which cannot be tolerated by its trade partners any longer. Expansion of domestic consumption, thus, has become an unavoidable issue in the adjustment of China's economic structure. In order to expand domestic consumption demand, the Chinese government has to raise the income level of its residents at various echelons, reversing the years-long trend in which income growth of residents lags behind general economic growth, as well as the trend of the widening income gap between residents in different income brackets. Furthermore, efforts should be put on the reform of social protection system akin to people's interests, reform of medical and hygiene system, and reform of educational system, so that people dare to expand their consumption carelessly.
The complicated problems involve not only the adjustment of economic structure, but also in-depth contradiction triggered by reform of the overall economic system, as well as social and political reforms. However, external and internal pressures have made such reforms more urgent. In the end, it appears that the thorny problems can be alleviated and solved via continuous growth of the economy. |
