Chinese people's huge appetite for houses and cars will keep the country's economic growth at more than 8 percent per annum over the next two decades.
Zhang Liqun, a senior researcher with the State Council's Development Research Center, said China's retail sales, fuelled by large consumption items such as houses and cars, would become a leading force in the country's future economic development.
The country's retail sales are expected to grow more than 10 percent annually over the next two decades, he said.
Qi Jingmei, an economist with the State Information Center, said the stronger payment capacity built up during the past decades has enabled people to increase spending in products such as cars and houses.
Figures from the National Bureau of Statistics suggest that an average urban family owned 223,000 yuan (US$26,867) worth of total assets in 2002, of which 78,000 yuan (US$9,398) was liquid assets.
"These families have played and will continue to play an important role in China's car and house market," Zhang said.
China's housing market witnessed a sharp price rise of 12.9 percent during the past seven months.
"This was a clear indication that the demand was strong," Zhang said.
The country's car consumption, which is now experiencing a market adjustment, will grow at a higher level in coming years, he said.
Zhang Xin, an analyst with Guotai & Jun'an Securities Co, said: "We should not be very pessimistic about future growth of the auto market because the government's macro-economic controls on the industry are temporary and consumers' purchasing power remains huge."
"The skyrocketing increase of the domestic vehicle market seen over the past two years will not be sustainable, but it is foreseeable and healthy that the market will rise at a rate two to three times that of gross domestic product growth over a long period of time," Zhang said.
He said the strong demand for cars and houses, which is a major feature of the current consumption trend, would not be a short-term story.
China has about 800 million rural people. "These people will demand a large amount of cars and houses during the country's urbanization," he said.
"China's future consumption expansion has solid financial supports," Zhang said.
The economy, which is closely tied to the increasing consumption demand, has entered a new development period.
Consumption will also be driven up by the country's economic system reform, establishment of the social security system and the growing role of the financial transfer payment mechanism, he said.
"The possibility of an increasing income gap between the poor and the rich, which is considered as a major obstacle for future consumption, will not be very big," Zhang said.
"People's stable income growth will provide a strong support for consumption expansion."
However, China's present consumption demand is still weak, when compared with fixed asset investment.
"The fast fixed asset investment in recent years has had a positive effect on the country's economic development," Qi said.
But the country could not rely on that for long-term economic growth, she said.
"If there is no strong consumption demand, an oversupply in production resulted from the investment will have a big negative impact on the economy," she said.
The government should try to turn the consumption demand into its top economic priority, she said.
(China Daily September 13, 2004)
