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March 23, 2010

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Home » Business » Economy

Better social safety net key to domestic demand

CHINA will continue to improve its social security system and increase the income of low-paid households to stimulate domestic consumption, which is "a long-term strong point" of the country's development, said a senior government official yesterday.

Zhang Ping, director of the National Development and Reform Commission, said at the China Development Forum in Beijing that China should further expand domestic demand, spurring people's consumption in particular, to sustain the country's economic development.

"To stimulate consumption is a long-term strategy, and represents a strong point of China's development," Zhang said in a keynote speech. "We will accelerate the adjustment of China's income distribution system and enhance help for low-income households through improving the social safety net, which will clear people's concerns when they consume."

China moved to reduce the economy's reliance on exports by shifting to domestic consumption and investment as major drivers of the economy last year amid the global financial crisis.

Of the 8.7 percent growth in China's gross domestic product last year, investments contributed 8 percentage points, and consumption 4.6 percentage points. Net exports eroded GDP growth by 3.9 percentage points.

Promoting domestic consumption has become key to sustain the country's economic development when policy-driven investments may gradually lose steam with an exit from the stimulus measures.

There is no timetable to quit the stimulus but Premier Wen Jiabao said earlier this month that "China will be very cautious and flexible in choosing the timing of the stimulus exit" which sparked expectations of the move.

"China will continue to improve the policies for spurring consumption, expand the coverage of consumer credit and better regulate market prices to provide people with a safer and easier environment for consumption," Zhang said.

"Government investments should be channeled to public projects in rural areas, especially health care and education, so that a better social security system can be set up," he said.


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