In recent years, investment and exports have contributed more to China's economic growth than consumption. With the gradual exit of the country's policies and measures aimed at encouraging investment and export, the previous economic growth momentum driven by investment and exports is expected to weaken. That, together with the slow progress in raising people's incomes and improving the country's social security network - two factors that will affect domestic consumption - will put a drag on the country's sustainable economic growth.

To change this situation, the country should try to extricate itself from its excessive dependence on external demand and turn to domestic demand to develop a new economic growth pattern based on a balanced development between consumption, investment and export.

A diversified and balanced industrial structure should be set up to promote coordinated development between the first, second and tertiary sectors. Also, innovation and high-tech industries should be encouraged.

China's high-paced economic growth has benefited from the low cost of labor, people's high saving ratio and the country's excessive investment.

However, the global financial crisis, together with the gradual disappearance of its demographic dividend and the low-cost use of land, energy and resources, means it will be difficult to sustain a development model based on the increased use of labor and capital. This will necessitate the country pushing forward its industrial structural upgrading, accelerating the creation of a labor capital market and promoting technological progress in a bid to realize economic transformation from an extensive to intensive basis.

The country's long-controversial income distribution pattern should be optimized to people's advantage. To implement the income distribution blueprint mapped out by the 12th Five-Year Plan, effective and concrete measures should be taken to build a reasonable and well-developed primary income distribution system that covers people's wages, social security and welfare. Measures should also be taken to adjust the income distribution between the government, enterprises and individuals and to steer the nation's wealth more toward individuals. The current earnings ratio between capital and labor should also be adjusted to change the unreasonable capital-dominant earning distribution structure.

Active measures should be taken to adjust the country's current energy structure. According to the current development model, a one-percentage point increase of GDP will need an additional 0.8 to one percentage point of energy consumption.

In 2009, the Chinese government promised to reduce its carbon dioxide emissions for every unit of its GDP by 40-45 percent in 2020 from the 2005 level, a commitment that will force the country to slow its economic pace. External pressures and internal demands will also prompt the country to improve the efficiency of its energy use and develop new and clean energy to optimize its energy structure.

What the country should try to do is develop a quality and efficiency-based economic development model.

The author is an economics researcher with the State Information Center.

(China Daily 03/22/2011 page8)