The Ministry of Commerce has made proposals to raise the ratio of entire consumption to the gross domestic product.

Qi Jingmei, an economist with the State Information Center, said China's present consumption demand is weak, when compared with fixed asset investment.

The country can not rely merely on investment for long-term economic growth, she said.

"If there is no strong consumption demand, an oversupply in production resulted from investment will have a big negative impact on the economy," she said.

As a result, the government should map out a consumption policy, which tallies with China's real situation, an official with the Ministry of Commerce said.

"Consumption policy should be given equal emphasis, like those on fiscal policy, monetary policy and industry policy," he said.

In recent years, the income gap between the poor and the rich has widened.

"The government should reform the present distribution system to give key attention to increasing residents' income," he said.

The personal income tax and consumption tax system should also be improved to help encourage consumption.

By the end of June this year, Chinese residents' savings deposits reached 11.38 trillion yuan (US$1.37 trillion).

"This means residents continue to save money for future spending, such as unemployment, pension and education," the official said.

The government should speed up establishment of the social security system and give key emphasis to the development of the insurance industry to remove people's worries about the future, he said.

The government should also improve the consumption credit policy and speed up the establishment of a social credit system to help spur consumption, he added.

Meanwhile, a modern market system and an optimized consumption environment should be established as early as possible, the official said.

Zhang Liqun, a senior researcher with the State Council's Development Research Centre, said if there was no consumption demand growth, the country will not achieve sustainable economic growth.

He expressed his belief that China was capable of maintaining relatively high consumption growth in the coming two decades.

(China Daily October 13, 2004)