China should switch from an export-oriented to a consumption-based economy to mitigate the impact of the global downturn and boost the world economy, said Li Daokui, dean of the Department of Finance of Tsinghua University, in a discussion yesterday at the 2009 Summer Davos in Dalian. "The financial crisis demands China take a new growth path," said Li. "The country should change its export-oriented focus and find ways to expand domestic demand on a lasting and substantial basis."

Li Daokui, dean of the Department of Finance of the Tsinghua University, in a session yesterday on "The Global Dimensions of China' s Domestic Growth," at the 2009 Summer Davos held in Dalia. [china.org.cn by Guo Xiaohong]

China's export-led economy has suffered badly in the global recession. Exports declined by 22 percent from January to July this year, according to Ministry of Commerce statistics.

But China is transitioning from dependence on exports to relying more on domestic consumption. To further increase domestic consumption, the country must increase incomes, reduce taxes, and expand financial support, said Li Daokui. Growth in personal incomes is falling behind GDP growth and the share of household income in GDP is falling.

Domestic consumption in China can also help reduce the dependence of emerging Asian economies on markets in Europe and US, and form new pattern of balanced world trade, said Zhao Xiaoyu, vice governor of the Asia Development Bank (ADB). By the year 2040, ADB foresees three giant economies, China, India, and Japan, will be playing leading role in the world economy. Zhao said that China and US are both engines of the world economy, and that neither country can promote growth on its own.

Zhao Xiaoyu, vice governor of the Asia Development Bank (ADB), in a session yesterday on "The Global Dimensions of China's Domestic Growth," at the 2009 Summer Davos held in Dalian. [china.org.cn by Guo Xiaohong]

Domestic consumption can help stabilize China's economy in the current economic crisis, but it is questionable whether it should be a long-term, permanent strategy, as China is still a manufacturing powerhouse, said Cao Dewang (Cho Tak Wong), chairman and CEO of the Fuyao Glass Industry Group, a major producer of automobile glass. Cao is known as China's Bill Gates because of his charity work. Chinese per capita income is only one tenth that of the US, and the country has a widening wealth gap. There is a long way to go before China can catch up with the US in terms of consumption, said Cao. Although the market for luxury goods is almost as large as that in the US, it amounts to only a small percentage of China's 1.3 billion population, he added.

Cao Dewang (left), chairman and CEO of Fuyao Glass Industry Group which produces more than half glass for automobile, in a session yesterday on "The Global Dimensions of China's Domestic Growth," and Sarah Omotunde Alade, deputy governor (Economic Policy) Central Bank of Nigeria, at the 2009 Summer Davos held in Dalian. [china.org.cn by Guo Xiaohong]

US Ambassador to China Jon Huntsman said whether China is an engine of the world economy was not the key question.

"What's important is that what journey or pathway China is taking," said Huntsman. "Whether it results in fair market-opening measures, liberates certain sectors, promotes economic well-being and growth for more people, and enhances the living standards of East Asia Pacific regions, really count."