The Chinese government has lowered its economic growth target for 2011-2015 to 7 percent from 7.5 percent in the previous Five-Year Plan (2006-2010), the country's lowest annual growth target in two decades.

The new goal comes after China's economy actually expanded at an average rate of 11.2 percent each year from 2006 to 2010. As a result, China replaced Japan to become the world's second largest economy last year.

It is generally understood that the government's growth target will be routinely surpassed, and China's economic growth will not fall below 7 percent in the near future.

"China's economy is expected to continue to grow at a relatively fast rate for at least two or three decades due to great potentials in its industrialization, urbanization and globalization," says Wang Jun, a macro-economic researcher with the China Center for International Economic Exchanges, a government think tank.

Wang says the lower target signals that the government is serious about rebalancing the economy. The 2011-2015 period may well be the time when the economy really changes from relying on exports and investment to becoming more domestically-driven, consumption-based, he says.

Domestic power

China's rapid economic ascent has been heavily fueled by exports and government investments in capital- and energy-intensive industries.

But the economic success comes with heavy costs: pollution and a yawning wealth gap. The mode of development is "unbalanced, uncoordinated and unsustainable," according to Premier Wen Jiabao.

China understands the problems facing the economy and has outlined a plan to fix them, Wang said.

The government pledges to, over the next five years, prioritize growth that is healthier, sustainable and, most importantly, do a better job converting big GDP gains into improved human welfare to boost domestic consumption.

China's economy has relied so heavily on trade and investment that domestic consumption only accounted for 49 percent of GDP in 2008, with household spending accounting for just 35 percent.

Household consumption accounts for around 71 percent of GDP in the United States and 57 percent in India, according to the World Bank.

No one is arguing that China can't consume more.

"China has 800 million rural citizens and their income and consumption is relatively low. There's the potential for China to increase consumption and domestic demand," said Li Deshui, former director of the National Bureau of Statistics.

China's urbanization rate is expected to increase to 51.5 percent by 2015 from the current 47.5 percent, as more rural people swarm to cities in hope of higher paid jobs and better living conditions. In 2010, China had 242 million migrant workers.