China Needs a Raft of Reforms to Make New Economic Strategy Work: Government Advisers

Xi’s new development model will be discussed at a meeting of the ruling Communist Party in October, where policies are expected to be built into the next five-year road-map for the economy.

While domestic consumer spending accounted for 55.4% of China’s GDP last year, it remains far lower than levels of 70-80% seen in developed economies. To get to more than 70% by 2035, China needs to boost consumption’s share of GDP by 1 percentage point annually, Yao said.

China has long sought to shift towards consumption-led growth from exports and investment. Last year, total exports and imports represented 32% of GDP, down from a peak of 64% in 2006, according to government data.

Yao also said that due to the new model, China’s foreign exchange reserves, the world’s largest, will see a slower pace of growth. A rising yuan could weaken China’s export competitiveness and spur imports, which could lead to more balanced trade over time, he added.