China's consumption demand will remain stable this year, economists said, but it will play an increased role in economic development.

Zhang Liqun, a senior researcher at the State Council Development Research Centre, said the country's consumption demand would not experience any major fluctuations this year.

"Ordinary people will not increase or reduce their consumption," he said.

Zhang's remarks were backed by Jiang Bing, a 32-year-old lawyer working in Beijing, who said he has no major spending plans this year.

Jiang's case was not an isolated one, Zhang said. He predicted China's retail sales, an important barometer consumption demand, will grow this year by 13 to 14 per cent.

But consumption's contribution to the gross domestic product will increase, as a result of the impact of the government's macro-economic control measures on investment, one of the three engines of the country's economic development, he said.

But strong imports will also reduce the country's trade surplus, another major economic driver.

Peng Longyun, a senior economist at the Asian Development Bank, agreed that consumption demand would remain at a similar level to last year, which rose a year-on-year 13.3 per cent.

"People's purchasing power, built up during the past few years, will continue to be exerted in 2005," he said.

Personal incomes will also continue to grow, as the government has decided to take measures to co-ordinate the relationship between consumption and investment, he said.

Meanwhile, people remain generally optimistic about the future, he said.

"If there are no major unpredictable events such as the SARS (severe acute respiratory syndrome) outbreak, the country's consumption demand will not reduce, nor will it increase rapidly," he said.

Retail sales will grow by more than 10 per cent this year, he said.

Qi Jingmei, a senior economist at the State Information Centre, said the country's consumption demand will continue to grow at a double-digit rate.

But the rate will slow slightly compared with last year, she said.

"The country's fixed asset investment and industrial output will decline in 2005," she said. "Growth in the gross domestic product will also drop."

Slower economic growth will also impact on people's income growth to a certain extent, she said.

Rural people's incomes will not maintain the high level of growth witnessed last year.

Farmers' income grew year-on-year by 6.8 per cent last year, largely due to grain price rises and the government's increased policy support.

"Grain prices won't rise that fast, although the government will continue its policy support this year," she said.

Slower economic growth will also have a certain impact on people's optimism in the future, she said.

The country's retail sales are likely to drop slightly to 12.5 per cent this year from about 13.3 per cent last year, she said.

China has long suffered from weak consumption demand compared with fixed asset investment, Qi said.

A long-term reliance on investment to fuel the country's economy might be risky, she said.

The fast growth in fixed investment but weak demand would result in a production oversupply, which would have a negative impact on the economy, she said.

(China Daily January 31, 2005)