Ways to keep economy vibrant

The global financial crisis that originated in the United States has not only dealt a heavy blow to the world economy but also had enormous impact on China's economic development, making the world's third largest economy feel more urgent to change its long-established growth model.

To regain its past fast-growing momentum, there is extensive consensus within China on expanding the slackened domestic demand, and domestic consumption in particular, as a tool to expedite the lagging pace of economic development. Hence, the expansion of domestic demand has become a priority area for government stimulus packages. However, how to boost domestic consumption, especially household consumption, still remains a headache the Chinese government is yet to address.

In fact, China's final consumption expenditure growth rate has not been at a low level in the past decades. It has been faster than the majority of other world economies. From 1991 to last year, the country's annual consumption growth rate in this regard was 15 percent and 9.5 percent in nominal and real terms respectively. Household consumption has also maintained robust momentum during the same period, which stood at 14.5 percent and 9.04 percent year on year respectively in nominal and real terms. Nevertheless, the prospect of China's individual consumption remains far from upbeat, given that the country's household deposit growth has not kept pace with that of its total deposit. The ratio of enterprise and government savings to the country's gross domestic product (GDP) nearly doubled from 1992 to 2007, from 11.3 percent to 22.9 percent and 4.4 percent to 8.1 percent respectively. During the period, the country's household savings to its GDP remained almost at a standstill. The high household savings have been mainly contributed by the medium- and high-income families, with their contribution to deposit being 70 percent both in urban and rural areas. Accounting for 18 percent of the country's total population, middle- and high-income urban residents have contributed about 50 percent to the country's total domestic deposit.