Salary hikes will kick-start consumption

When China's economic growth is targeted at 7.5 percent and domestic demand becomes the main engine driving growth, it is crucial to implement measures to increase salaries and create an economy more conducive to consumption, officials and executives agree.

In working to hike domestic demand, China will focus on boosting consumption, Premier Li Keqiang said in his recent work report to the National People's Congress.

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But since consumption is dependent on disposable income, salary increases become more significant and should be in line with the growth of the Consumer Price Index, CPPCC members said during a panel discussion.

"The government should have a specific target in improving the payroll level and release a guiding index," said Yang Yuanqing, chairman and chief executive officer of Lenovo Group Ltd.

Public institutions currently are finding it difficult to catch up with CPI growth, let alone private companies.

"Government offices are supposed to be the leader of salary increases," said Yang.

China's domestic consumption accounts for less than half of its GDP. Economic growth still relies on exports and investments, according to Yang.

"Once consumption is expanded, the economy will be less reliant on the changeable overseas markets. It will ease China's conflicts with trading partners," he said.

Still, the problem of creating consumption hot spots and getting people to spend more at home remains a tough one.

Chinese tourists tend to prefer shopping overseas. Creating a better consuming environment will be a critical part of pulling them back.

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