Consumption climbs in first half

The toy section at a supermarket in Yichang, Hubei province. Consumption accounted for a record 60 percent of China's GDP in the first half of the year. [Photo/China Daily]

Value of goods and services dominates, but investment growth sees sharp decline

Consumption accounted for a record 60 percent of China's GDP in the first half of the year－a strong indication that the rebalancing of the economy has gained momentum.

But that also resulted in falling investment growth, due to a weak property market and manufacturing sector, and insufficient funding from local governments, experts said on Wednesday.

The consumption percentage has been closely watched by economists as China's growth model has become more reliant on investment over the past decade.

The contribution of consumption－or the value of good and services sold to people－to GDP increased to 50.2 percent in 2014, from 48.2 percent in 2013.

"A growing contribution from consumption is in line with the country's goal for economic restructuring, but it would be better if such a shift is based on growth of both consumption and investment," said Zhang Changchun, director of the Institute of Investment at the National Development and Reform Commission.

Both the growth rate of consumption and investment slid in the first half, however, with the pace of investment retreating even further.

Retail sales of consumer goods grew 10.4 percent year-on-year during the period, down 1.7 percent from the previous year.

Overall fixed-asset investment, excluding rural, rose 11.4 percent year-on-year in the six months, down 2.1 percent on the previous year, said the National Bureau of Statistics.

Zhang said the latest fixed-asset investment figure suggested that sluggish growth of investment is expected to continue in coming months, due to ongoing funding pressures on local governments.

Last year the State Council banned local government financing vehicles, or LGFVs, from raising debt on behalf of local authorities.

Although the central government has since eased curbs on bonds issued by LGFVs, Zhang said the funding levels available for municipal or provincial bonds still cannot meet the financing needed for these projects.

The government also accelerated its rate of project approval in the first half of the year by cutting red tape and strengthening supervision of local government capital allocation.