China could maintain reasonable GDP growth of 5-8% while transitioning to a consumption driven economy

Ha Jiming, a managing director of investment banking at Goldman Sachs and former chief economist at China International Capital Corporation, said domestic consumption will be critical to China’s GDP growth during the 10-year period. Ha Jiming projects that China’s gross domestic product (GDP) will maintain a moderate growth of 5-8 percent in the next 10 years as the country shifts to a consumption-driven economy.

Domestic investment accounted for 50 percent of China’s GDP in 2010, compared with a 40 percent over the past 20 years, he said. He projected that the ratio will return to “a normal level” in the next few years. Local consumption will climb to about 60 percent of China’s GDP in the next decade, higher than the historic average of 56.5 percent, Ha forecast.

“Residents in rural areas have great potential to drive consumption because consumer products are still not popular there,” he said. “With the increase in their income, the market will have a lot of space to grow.”

According to Ha, the income of Chinese urban residents is rising by 10 percent per year, while that of rural residents is increasing by 12-13 percent annually.

However, with China’s increasing aged population, labor costs in the country will also rise as the 15-64-year-old labor force declines, starting in 2015, he added.

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