Urbanisation will be the main driver of economic growth for the future, Vice-Premier Li Keqiang, who is set to succeed Prime Minister Wen Jiabao in March this year, has said.

Domestic demand, especially from unprecedented urbanisation, is projected to overtake exports to become the main driver of the economy, the state-run China Daily quoted Li as saying.

Growth will be more focused, with the onus on quality and efficiency, not just speed, said Li.

He was elected along with Xi Jinping for the top two slots. Xi who was elected as General Secretary of the Party would takeover as President when the incumbent Hu Jintao retires in March.

Li said economic growth must be real.

Growth will have to ensure more job opportunities, higher incomes, better performances by enterprises and more effective use of energy and resources, he told a meeting convened to discuss new initiatives to deepen reforms and open up process.

Urbanisation in predominantly agrarian China has already crossed over 50 per cent this year with more people living in cities than in rural areas.

Li also said it is an urgent task to reform investment and fund-raising systems to boost domestic consumption and asked the officials to clear the hurdles for the reform.

Large-scale urbanisation and related development projects are likely to drive GDP growth to 8.4 per cent in 2013, the World Bank had said on Wednesday.

Many economists forecast that the Government would set the GDP target at around 7.5 per cent for 2013, the same as 2012, the Daily said.

A higher target might give the impression that growth, rather than its quality, was the priority, it quoted officials as saying.

“Improvements in the financial system will also help cut down the downside risks in 2013.

“The Government will offer tax cuts and help small enterprises and companies in the service sector,” according to Xu Hongcai, economist with the China Center for International Economic Exchanges, a government think tank.

Xu said he is also looking forward to massive investment in urban rail systems, telecom and subsidised housing projects for low-income households.

But the investment blitz should be tempered to avoid excessive production, as inflation may rebound in the coming months, he said.

Some economists predict that the 2013 consumer price index, a main gauge of inflation, will be around 3.5 per cent.

Xu said he will not rule out the possibility of a four per cent inflation rate.

“The CPI may rise faster in the second half of next year,” he warned, saying easy credit supply from the US Federal Reserve will probably drive up global commodity prices and cause capital inflow into emerging-market countries.

A recent report from the Fitch ratings agency said it is inevitable that more reform measures will be launched in China in 2013 to facilitate the economic “rebalancing”.

Related Topics
comment COMMENT NOW