China's economic expansion will depend on domestic demand maintaining 7 to 8 percent growth year-on-year in the next decade, as exports may see single-digit growth in the long term amid the dim global outlook, Bank of China said on Wednesday.
Consumption, combined with investment, will boost the world's second-largest economy by 8 percent in 2013, with a slight rebound of inflation to 3 percent, according to the report, released on Wednesday.
Over the next 10 years, consumption will overtake investment to become the most powerful engine of China's economy, supported by the "income-doubling plan" until 2020 presented at the 18th National Congress of the Communist Party of China in November.
In order to achieve the ambitious plan, the annual average growth of urban and rural per capita income will need to be as high as 7.18 percent, and "it is achievable", the report said.
"By the year 2020, the annual total consumption value is likely to reach $10 trillion, and China will become the world's largest consumption market after 10 years," said Song Liang, deputy head of the international finance research institute under Bank of China.
At that time, consumption will account for 60 percent of GDP, 12 percentage points higher than that in 2012, while investment will decline to 39 percent from 48 percent last year, the report said.
The bank predicted that total retail sales of consumer goods will increase by 14.5 percent next year from 2012.
Another recent forecast made by by the State Information Center, a government think tank, said that consumption in 2013 may grow at 14.6 percent, and the year-on-year increase of total retail sales this year is expected to be 14.2 percent.
According to the information center, China's exports will increase at a slow pace next year - about 8 percent - and import growth may be 7.8 percent.
"The increasing importance of consumption will provide impetus for economic restructuring in the future," said Cao Yuanzheng, chief economist with Bank of China.
The government's macroeconomic policy is expected to generally remain stable over the next year, Cao said. "The fiscal measure is better to be more proactive while the monetary policy can be slightly eased," he said.
"There is nearly no room for future lowering of commercial bank interest rates in 2013. Total lending is likely to be 8.5 trillion yuan ($1.36 trillion), with a 14 percent growth of the broad money supply," Cao said.
The central bank may cut the reserve requirement ratio one or two times next year, based on the changing situation of its counterparts in foreign exchange reserves, Cao said.