The last and possibly most important reason for low consumption is our social security system. Due to imperfections in the social security system and low social security coverage, China's short-term consumer expectations remain unstable. Many a survey on the purpose of saving indicates that Chinese people save money for medical services, retirement, housing and their children's education. Most Chinese families spend less to save more, thus evading the risk of being unprepared for family-related financial emergencies in the future. That is also why China fared relatively well in this round of the worldwide financial crisis.

What influence does China's consumption mode exert on its economic development?

As we all know, investment, exports and consumption are the three major engines powering the economy. China's foreign trade accounted for more than 60 percent of its total GDP, which is a rather high proportion that comes with higher risks. Consequently, our export sector suffered greatly from the global financial crisis.

Moreover, the financial crisis, in the long run, will cause the resurgence of international trade protectionism and mounting trade conflicts. Some countries fear that they will see a reduction in job opportunities from a flood of Chinese goods. In this sense, we should not levy our hope for economic growth solely on exports, but more on expanding domestic consumption, which should play a leading role in changing our economic growth mode.

When it comes to investment as a means to push forward economic development, we should also keep in mind that too much dependence on investment also facilitates potential risks, such as redundant investment, inflation and low investment returns. For this reason, we should further restructure our economic growth mode by expanding domestic consumption and improving consumption levels.

What measures has China taken to improve consumption?

China has been striving to increase social welfare expenditure, including subsidizing low-income groups and enlarging social security penetration.

It has been widely acknowledged that high-income families tend to have lower consumption rates as their income increases, while low-income families tend to have higher consumption rates. According to a survey conducted in 2008, the consumption rate for high-income families was only 50 to 60 percent, while the consumption rate for low-income families was as high as 90 percent. That is to say, these low-income families had to spend all their earnings to make ends meet. In order to change the consumption structure, we need to increase the income of the low-income class, including farmers and migrant workers, as well as improve the basic-living guarantee system for the poor. What is more, we should enlarge the proportion of the middle-income group by putting limits on excessively high income while controlling fraudulent income.

In order to enhance social security, China proposed an overall social security system. By now, medical security has almost realized overall coverage, although the detailed system differs from region to region among different occupations. Public servants and staff in the public service sector are provided with security by the country; Urban residents and workers can choose their medical insurance; And cooperative medical services are available for peasants. Through all these measures, we could say that China has realized overall medical security.

The same broad coverage has also been implemented with basic-living guarantee system. To date, a population of 60 million is entitled to subsistence allowances, out of which more than 20 million live in rural areas and 40 million in urban areas.

Comparatively speaking, social security for the elderly has been somewhat slow moving. At present, the urban areas are vibrantly pushing forward social security for the old. The government has ordered that by the end of this year pension systems be in place in more than 10 percent of the country's villages. Establishing a comprehensive social security system covering pensions, medical services and basic-living guarantee system, we believe, will play an important role in stabilizing the consumer expectations.

We should push forward the equalization of public services and public products in addition to enhancing social services in rural areas.

We have also found that the proportion of income spent on food has decreased dramatically over the years. Since people are saving money mainly for medical services, education, retirement and housing, if we could fare well in these four aspects, Chinese people will have a stable consumer expectation and feel more comfortable spending their money.

Should high consumption be encouraged in China?

I don't think China should encourage high consumption. Since we have a population larger than the total population of the advanced countries combined, it would be a disaster for the environment, natural resources and energy needs if high consumption were encouraged in China.

On the one hand, China should enlarge the proportion of consumption in the overall economic structure. On the other hand, the idea of moderate consumption and frugal spending should also be encouraged.

When do you think the measures that the Chinese Government has taken to stimulate domestic consumption will pay off?

The consumption rate, as a complex indicator, is composed of many factors, including consumption habits and even the gap between the rich and poor. It is very hard to get an accurate measure since the interests of various groups of people are involved. Even in the United States and Europe it is difficult to say whether the high consumption rate is good or not. And although China has taken forceful measures, we will not see immediate results.