IMF Report: China Relying On Domestic Demand To Facilitate Growth

Expected to grow at 10.5% in 2010, China's economy is preparing to change its model of growth from an economy driven by exports to a domestic-driven economy by boosting domestic consumption, according to a report by IMF.

The Washington-based organization predicted that the Chinese economy will expand by 10.5% this year and then 9.6% in the following year, contrary to global economic growth of 4.8% in 2010 and 4.2% in 2011.

China's growth will be driven by domestic demand significantly.

"Private domestic demand is poised to contribute to two-third of China's near-term growth and government activities about one-third, whereas contribution from net exports will be close to zero", the report stated, according to government run China Daily.

China, which has traditionally relied on exports to spur economic growth, is now seeking to boost domestic demand and adopt a more sustainable and balanced growth path.

IMF has also urged China to allow the yuan to strengthen in order to reduce dependence on exports and increase domestic demand.

With the country's five-year economic plan (2011-2015) yet to be finalized, amendment to the growth model is likely to be the most important theme.

Ma Jun, Deutsche Bank's Chief Economist for China, stated, "There has been a growing recognition within the top leadership that the old growth model is no longer sustainable, not just economically but also politically", while adding, "We expect the forthcoming plan to focus less on growth rates and more on structural adjustments".