Beijing prioritizes restructuring push

Driven by consumption

Beijing has developed into a consumption-driven economy with consumption contributing more than 70 percent of its GDP growth. From 2006 to 2010, retail sales rose 16.4 percent annually. In 2008, the capital became the country's largest city in terms of retail sales.

However, retail sales only rose 8.8 percent year-on-year in the first half, the slowest growth pace in 11 years.

"There are deep reasons for the slowdown. The growth of urban household incomes fell, which dented the willingness of people to consume. In addition, restrictions on the purchase of houses and cars keep weakening the growth momentum, while the consumption potential in emerging sectors, such as education, culture and recreation, has yet to be unleashed," Wang said.

Chen Ji, head of the industrial research institute at the Capital University of Business and Economics in Beijing, said that the city's consumption growth in the first half is very important against the overall economic growth slowdown, and the government should further steer the economy toward a path driven by domestic demand.

Wang added that the key to expand domestic demand lies in consumption and that "we need to further improve policies to increase the incomes of urban and rural residents and boost their willingness to spend. In addition, we must attach great importance to the emerging frontier of consumption and strengthen the contribution of consumption to economic growth".

In the second half, Beijing will introduce policies related to credit and furniture trade-in, while boosting the development of cross-border e-commerce and consumption for services in healthcare, education, culture and recreation, according to Wang.

"In addition, we will also make full use of investment as the central government simplifies investment approvals. Investment is the most direct and effective driver for economic growth," Wang said.

The city's fixed-asset investment started to ease in April and only 32 out of 68 planned key projects were started in the first half because of approval procedures, compensation disputes for land use and slowed funding, Wang added.

"We don't lack projects because private capital is abundant and projects for infrastructure, environment and social development won't lead to redundant building," Wang said. "The key move is to deepen reforms and make full use of market mechanisms to encourage all kinds of investment. We'll introduce specific measures to solve the challenges of slow approval processes and high costs in land use to keep a steady and optimized investment growth."

In the second half, the municipal government will boost consumption and investment to stabilize economic growth and fulfill the full-year targets, said Zhao at the Beijing Municipal Commission of Development and Reform.

In the January-to-June period, foreign direct investment in Beijing rose 10.4 percent year-on-year to $4.91 billion, with the service sector accounting for 83.8 percent of the total inflow, according to the Beijing Municipal Commission of Commerce.