The bane of domestic consumption

Retail sales in China grew 14.3 percent in 2012, ending with an encouraging year-on-year increase of 15.2 percent in December, and consumption (including government consumption) accounted for 51.8 percent of GDP.

China has also established itself as the world's largest automobile and mobile phone markets (keenly eyed by Apple, for example), and the most important luxury goods market. So one could be forgiven for thinking that 2013 will see domestic household consumption become the driver of China's growth. But will it turn out that way?

With such a large population, it only takes a small proportion of wealthy consumers to create a worthwhile market for luxury goods. However, the average income of consumers in China still remains modest - average annual urban disposable income was just 24,565 yuan ($3,947) in 2012. Income remains very unevenly distributed as China's Gini coefficient settled at 0.474 in 2012. Although down from 0.477 in 2011 and from a high of 0.491 in 2008, it is still well above the 0.4 mark that is seen as unacceptably skewed toward the minority, that is, rich people.