The Chinese government should consider abstract factors such as consumer confidence, financial uncertainty and credit availability in seeking to encourage domestic consumption, says a senior official.

Consumption was adversely affected by "non-income" factors such as consumer psychology in the face of inflation, uncertainty over the future, a lack of social security and insufficient credit, said Qui Xiaohua, director of the National Bureau of Statistics.

Official statistics showed final consumption (household and government consumption) percentage of the gross domestic product (GDP) had fallen from 61.8 percent in 1991 to 52.1 percent in 2005, Qiu told the National Research Forum of Chinese Consumption.

Meanwhile, the percentage of household consumption of the GDP had dropped from 48.4 percent to 38.2 percent in the same period.

Qiu said the slow pace of China's industrial restructuring caused production surpluses, which stimulated competition, so the prices of some goods fell steadily and consumers, who expected even lower prices, postponed their purchasing plans.

With housing prices, medical charges and tuition fees rising faster than the income growth rates of most households and a social security network yet to be established, householders preferred to save for unexpected contingencies, Qiu said.

An inadequate credit system also restricted consumers' purchasing power.

Source: Xinhua