In fact, because of the financial crisis, China’s economic growth pattern has changed from one driven by export and investment in infrastructure construction to one led by a troika of consumption, export and investment. The policies to boost domestic demand include increasing people’s wages, reducing tax burdens on businesses and individuals, and encouraging rural consumption of home appliances and autos. At the same time, the government infuses into the mix more financial support for agriculture and farmers.

The pro-consumption policies have produced speedy results. Taking the auto industry as an example, government initiatives such as tax and subsidy incentives, greatly spurred demand. According to statistics released by the China Association of Automobile Manufacturers, China sold over 13.64 million vehicles in 2009, overtaking the United States to become the world’s largest auto market. Of these, 7.2 million, or 69.65 percent, are cars with an engine capacity under 1.6 L, marking a sudden growth of 71.28 percent per annum. This steep increase was the immediate result of a 50 percent cut in the purchase tax on smaller cars.

According to statistics newly released by the General Administration of Customs (GAC), China’s total trade in 2010 reached nearly US $3 trillion, and demonstrated increases of up to 34.7 percent year-on-year. Imports surged by 38.7 percent and the country’s trade surplus fell by 6.4 percent to US $183.1 billion. Wang Han, an economist at the Shanghai-based advisory firm CEBM, told Reuters:“The Chinese economy is adapting to growth in domestic demand. Imports are much stronger than we expected, indicating that domestic investment and internal demand are mainly what’s pushing up domestic consumption.”

China’s changing economic growth pattern also benefits manufacturers all over the world. South Korea’s Joong Ang Daily reported that more and more Korean manufacturers of consumer products such as home appliances and cars are riding on the coattails of China’s economic ascent. Makers of liquid crystal display (LCD) televisions are one of the luckiest. Statistics show that about 4.96 million Korea-made sets were sold in the first quarter of 2009 in China, more than double the number sold during the same period last year. Encouraged by their sudden and massive lead in the market, South Korean companies, including LG and Samsung, are setting up more LCD panel production lines in China.

New Opportunities for the 2011-2015 Period

The Chinese economy will sustain its momentum during the 12th Five-year Plan period (2011-2015), largely by stimulating and satisfying domestic needs.

From 2011 to 2015, investment and construction in the renewable energy and environmental protection industries will stay on track. China is going to invest more than RMB 800 billion in hydropower projects and around RMB 1.058 trillion in subway construction in urban areas. In the country’s central and western areas, more investment will be put in industrial upgrades, factory building, equipment manufacturing and technology park construction. China will increase funding for affordable housing projects and speed up the renovation of old and unsafe buildings. The government has set a construction target of 10 million government-subsidized apartments, 72.4 percent more than last year. In addition, water infrastructure in rural areas becomes a major focus. The central government plans to put about RMB 988.55 billion into dealing with issues in agriculture, farmers and rural areas, up 15.2 percent compared with last year.

To fatten wallets with more disposable income, China is gearing up to fund its public service sector. In the 2011 to 2015 window, the central government will spend RMB 441.434 billion on social security and employment, an increase of 16.6 percent compared with the 2005-2010 period. RMB 129.266 billion is dedicated to subsidized apartments construction, an increase of 14.8 percent. Finally, RMB 172.758 billion has been set aside for healthcare and RMB 296.357 billion in education, both up 16.3 percent.

An ANZ bank report in February 2011 estimates that the new medical care scheme alone will trigger about RMB 862 billion in consumption. That figure may reach RMB 1.47 trillion if the downstream effects of better medical care for the population come into play. Similarly, reforms to the pension system will also unleash shopping sprees that send domestic consumption trends upwards.