China’s domestic demand, as the government had long wished, has started to become more of a driving force for the country’s economic growth than in the past.

Signs of a domestic consumption boost are apparent as people are spending more on domestic commodities, export falls, and the government plans for more consumption stimulus.

Data from the National Bureau of Statistics (NBS) last Wednesday showed that China’s domestic consumption had maintained an upward trend since the beginning of the year. For example, China’s retail sales rose 14.8 percent in April year on year. It was 0.1 percentage points higher than in March.

Rural spending, driven by a government rebate policy on home-appliance purchases and other commodities, grew by 16.7 percent in April, which was 2.8 percentage points higher than urban growth, according to NBS.

The booming property and auto market also showed the same trend as China became the world’s largest vehicle market again with more than 1.15 million cars sold in April, up 25 percent from a year earlier.

In the housing sector, China’s real-estate climate index was finally back to growth after ten months of decline. Property sales rose by 17.5 percent in acreage from a year earlier in the first four months of 2009.

The growth was 9.3 percentage points faster than the first quarter level.

“China’s economic structure has started to enter a transforming period to a consumption-driven growth model,” said Li Daokui, director of the Department of Finance at Tsinghua University.

Sustained domestic demand growth

According to Li, economic growth of China’s inland western and central regions, which relied less on export, had exceeded that of the coastal areas in the first quarter, reflecting a strong pull from domestic consumption and investment.

Data from regional statistics bureaus had shown that western and central China accounted for nine of the 11 provincial areas that had seen double-digit economic growth year on year in the first quarter.

Such growth was contrasted by coastal regions whose economy has been mainly driven by export, such as Shanghai, Zhejiang and Guangdong, gross domestic production (GDP) growth dropped to three- to- six percent.

“Domestic consumption, together with fixed assets investment, had become the main forces of China’s economic recovery as export continues to weaken,” Li told Xinhua.

His view was echoed by Zhang Liqun, a researcher with the Development Research Center of the State Council, a government think-tank, who said the continual growth in domestic consumption had provided “very strong” power for China’s economy to move on.

The local government has proposed a plan to expand its special economic zone (SEZ) to encompass the whole city as a way to boost its competitiveness during the downturn.

If the proposal pushes through, the Bao?an and Longgang districts will become part of the SEZ thus growing the area from 395.81 square kilometers to over 1,900 square kilometers.

Shenzhen was one of the first and most successful economic zones to set-up in the country during economic reforms in the 1970s along with Zhuhai, Shantou and Xiamen.

?Legislators are working on the proposal to expand the scope of Shenzhen SEZ to the whole city, but it needs the approval of the State Council,?an official with the legislative affairs office of the Shenzhen Municipal People?s Congress, who wanted to speak anonymously, told China Daily.

Just this month, Beijing added Shenzhen to the list of areas to begin pilot comprehensive reforms. The expansion plans comes at a time when the local government needs to develop commercial facilities and some businesses have been strapped for land to expand operations. If the whole city is declared a SEZ that would mean the removal of policy and legal differences inside and outside the area.

Linus Yip, strategist at Hong Kong-based First Shanghai Securities, says Shenzhen expansion will benefit business in the Pearl River Delta region. It would be no surprise if Shenzhen were to expand further and combine with Hong Kong. ?The two cities are, at the moment, quite closely correlated in terms of economic activities, and it will be irresistible for them to merge,?Yip added.