(Yicai) June 25 -- China’s real estate consumption in relation to the country’s gross domestic product is slumping to the levels seen in Western countries and this is not a bad thing as it will release more funds into the economy, the former deputy governor of the People’s Bank of China said at the ongoing World Economic Forum’s 15th Annual Meeting of the New Champions.

China’s real estate spending as part of the country’s gross domestic product was once the highest in the world at 16 percent, said Zhu Min, who is now on the Board of Trustees of the World Economic Forum and serves as vice chairman of the China Center for International Economic Exchanges.

But with the downturn in the country’s housing market, real estate consumption is likely to slide to around 12 percent, which is more in line with the level in Western countries and this is good news, he said.

“I believe it is important to apply the 4 to 5 percent of unleashed GDP to other types of consumption,” said Zhu.

In the first five months, Chinese residents’ savings increased by CNY9 trillion (USD1.2 trillion) and deposits have surged by nearly CNY60 trillion (USD8.2 trillion) in the past three years. This shows that people don’t have a strong desire to spend and also that supply is not meeting consumer demand.

More products should be provided to satisfy consumers’ needs and at the same time measures should be adopted to boost consumer confidence in consumption, such as by taking social security and many other respects into consideration, Zhu said.

China is in the process of becoming one of the world’s high-income countries and the focus of Chinese consumers is shifting to services-related consumer goods such as healthcare and education from basic consumer goods, he added.

The ageing population and the plummeting fertility rate are also reasons behind the drop in consumption demand, Zhu said. More consumer goods should target groups of people aged between 22 years and 60 years old, as people in this age group will be major consumers in the future. Busy working lives will also spur them to consume more.

The Chinese government should take the demand of different consumer groups into account when drawing up policies, align the economic structure with the services sector, provide more tailored services and strengthen reforms in sectors such as healthcare, education and tourism.

The World Economic Forum’s 15th Annual Meeting of the New Champions, also known as Summer Davos, kicked off today in Dalian, northeastern Liaoning province. Around 1,600 guests from China and nearly 80 other nations and regions are participating in the three-day event.

Editor: Kim Taylor