Better social safety net to boost consumption

China could strengthen its social safety net and innovate service offerings to further unlock the potential of its vast consumer base, as the world's second-largest economy accelerates its transition toward a consumption-led growth model, a senior executive told China Daily.

"Improving the social security system is paramount. People still have a prudent mentality that they need to prepare for any kind of life accident or opportunities and have a lot of savings," said Denis Depoux, global managing director at German management consultancy Roland Berger.

At the end of last year, deposits held by Chinese households reached 166 trillion yuan ($24 trillion), a twofold increase from a decade ago and a historic peak, according to data from the People's Bank of China, the country's central bank.

Based on the nation's population of 1.4 billion, this translates into an average of about 118,000 yuan in savings per person.

Depoux noted that releasing just 1 percent to 2 percent of this huge sum for consumption would have an "enormous" positive impact on the Chinese economy.

"A very strong upholding of the education and healthcare system" will help make income available for consumption, he said.

Finance Minister Lan Fo'an said at the China Development Forum on Sunday that the government will increase the share of public investment directed toward people's livelihoods, over the next five years.

"The country will continue to refine policies that invest in people, including issuing consumption subsidies for eldercare services, exercising childcare subsidies and improving policies for free preschool education," Lan said.

Meanwhile, the government will support the expansion of affordable childcare and eldercare service providers, to reduce the costs of family care for both the elderly and children, Lan added.

In addition to demand-side policy support, Depoux pointed to diversified supply catering to people's evolving needs as of equal significance.

"There are a lot of new services that still remain to be 'invented'," said Depoux. "The minute those services that can better fulfill people's emotional needs start to exist, we will see people going there, and generating a services contribution to GDP."

China has been opening service sectors to foreign investment, Depoux said, calling the nation "a fitness club" where foreign companies become competitive, move quickly and bring in the most cutting-edge innovations.

Pan Gongsheng, governor of the PBOC, said: "We will vigorously develop the service sector and promote reform, innovation, opening-up, and cooperation in the service industry."

"On the basis of being a global manufacturing powerhouse, China will accelerate its transformation into a core global demand market,"Pan said at the forum on Sunday.