The common myth about China's growth story is that it is mainly export-driven.
The fact, as many economists would testify, and quantified by a research report released yesterday, is that growth is largely led by domestic spending.
Yuwa Hedrick-Wong, MasterCard International's economic adviser for the Asia-Pacific Region, stressed yesterday that "China's growth is driven by domestic consumption."
The report, based on a survey of residents in eight cities, revealed domestic private consumption contributed an average 46.5 per cent to the nation's GDP in the past five years.
The ratio could reach 50 per cent in 2014. And higher income, higher returns on savings and the wealth effect of the real-estate market would all play important roles in unleashing potential consumption power, the report said.
"Despite the oil price rise, the stagnant growth of European economies, the adjustment of the exchange rate and the fluctuation of the stock market, Chinese consumers have more confidence in the state of the economy over the next few years," said Wong.
Real growth in private consumption has been at an annual 12 per cent in the past five years, the report revealed.
And it said the real growth rate in private consumption of those younger than 40 who are the driving force will reach 18 per cent annually in the next 10 years, with a 24-per-cent increase per year of those earning US$5,000 per year or above.
MasterCard estimates that if supported by higher returns on savings and a rising consumption-to-GDP ratio, a 12-per-cent increase in private consumption could boost GDP by 6 per cent in 10 years' time.
The rapid rise in incomes and the acceptance of new lifestyles are the two major factors in supporting stable consumption growth, the report pointed out.
Dining out in Western-style restaurants is a growing trend, especially among younger consumers. Those aged between 20 and 29 are dining out in such restaurants 2.4 times per month on average.
Dining out and entertainment account for 8 per cent of urban residents' expenditure; and more than a third of their money is spent on food and clothing, while mortgages and home-related expenditure account for a meagre 3 per cent and 4 per cent respectively.
The survey was conducted last year in three main cities - Beijing, Shanghai and Guangzhou - and five second-tier cities: Shenzhen, Chengdu, Xi'an, Wuhan and Shenyang. And its shows preferences vary from city to city.
People in Guangzhou, for instance, are keen on travelling abroad - 17 per cent of the respondent said they intend to make an overseas trip next year, followed by 15 per cent each in Shanghai and Beijing.
Shenzhen residents have the most appetite for real estate than people in other cities 22 per cent have taken a mortgage on currently-occupied property, followed by 18 per cent in Shanghai.
Whatever the differences, though, one thing remains the same. A big chunk of disposable income is deposited in banks. More than 80 per cent have savings in banks and only 17 per cent have dabbled in the stock market, which has been sluggish for more than five years.
Despite a possible economic slowdown, those between 20 and 29 years old, self-employed businessmen and those with higher education appear to be the most optimistic in their ability to raise their earnings in the coming years.
Self-employed business owners expect a 23.6-per-cent income increase in the next three years while those with a university education anticipate a 32.7-per-cent growth.
