NEW YORK - While the global economy continues to slowly churn and exports from China shrink, an expert says the Chinese government should enhance investments in social welfare programs to help grow domestic consumption, which will become the major economic driving force in the next 15 years.

"In the Chinese consumer market, people still save so much, despite the fact that they are not earning any annual returns from their bank deposits," said Jing Ulrich, chairwoman of global markets for China at JPMorgan Chase & Co. She added that the rate in which Chinese people save is still very high - 37 percent of their disposable income.

Because the economy has developed so quickly over the past 30 year, Ulrich saidys she thinks the Chinese government is focusing on reducing the income gap and providing rural areas with more services. But, she says it should build a stronger social welfare net.

"What the government can do is basically invest a lot of money in things like healthcare, medical services and education. And pay attention to really building a comprehensive social safety net so that Chinese citizens can feel more confident about saving a little bit less, and spending a little bit more."

Year-on-year GDP growth was 9.7 percent in the first quarter. It slowed down 9.5 percent in the second and 9.1 percent in the third, indicating an economy that is slowing, but still expanding, the National Bureau of Statistics said Tuesday.

China's export growth rate remained above 20 percent most months over the past several years, but dropped to 17 percent in September.

According to China Customs, exports by the end of September surpassed the total export volume in 2009, but is still 10 percent lower than the export figure in the same period of 2010.

Domestic demand growth also continues to slow. Domestic fixed asset investment growth slowed from 25.6 percent in the second quarter to 24.9 percent by the end of September.

Retail sales of consumer goods grew from 16.3 percent in the first quarter to 17.3 percent in the third quarter. But considering inflation, the actual growth rate is slowing, said Lian Ping, chief economist from the Bank of Communications.

Domestic consumption growth was down because of regulations to tame surging property prices, the end of an automobile stimulus package, inflation and other factors, Lian said.

"Overall, economic growth continued to slow down somehow due to domestic macroeconomic policies, the result of active regulations."

Ulrich also said he believes the housing market has influenced the buying behaviors of Chinese consumer.

Chinese residential transaction volume from the beginning of the year to October has dropped by 30 to 40 percent. And despite property prices growing by 10 percent nearly every year over the past three years, they have stopped appreciating.

Ulrich said some Chinese consumers felt the wealth effect recently, spending money on cars and traveling. But because most property values aren't appreciating, the upper crust has become more conservative with its money.

China Daily