World Energy Outlook 2007

education. However, the government has boosted public health and education
budgets, particularly for rural areas. Private consumption now accounts for 37%
of GDP, compared with 50%-70% in most other Asian economies, though it rose
by 12% per annum on average over 2002-2006. Urban spending grew most
rapidly.
Box 7.1: China’s 11 th Five-Year Plan
The government’s 11 th Five-Year Plan (2006-2010) aims to build a
“harmonious socialist society”. Growth of 7.5% per year between 2006 and
2010 is planned to prevent the overheating of the economy caused by overinvestment.
The government aims to cut energy use per unit of GDP by
20% and pollution by 10% by 2010. Other important goals include setting
up a “new socialist countryside”, reducing rural-urban inequality by
spreading development gains from the coastal to the inland area and
strengthening the services sector. The planned growth pattern is designed to
benefit the poor and make more efficient use of natural resources. The
government recognises that certain targets are proving difficult to achieve,
in particular with respect to energy intensity, and is strengthening efforts to
achieve these goals. The 11 th Five-Year Plan for Energy is described in
Chapter 8.
Main Drivers of Growth
Economic growth stems from increased inputs of labour and capital but also,
and more importantly in the long term, from productivity gains. Productivity
has benefited from the government’s decision, in the late 1970s, to give freer
rein to market forces, leading to the movement of labour and capital into more
productive sectors and faster technological progress. China’s growth has been
mainly driven by rapid capital accumulation, increased productivity resulting
from the steady movement of labour from agriculture into industry and
services, and growth of the private sector. Growth in productivity averages
3-4% troughout the reform period (Bosworth and Collins, 2007; OECD,
2005b). In 2005, productivity growth accounts for almost two-thirds of GDP
growth (Figure 7.3). Investment has contributed most of the rest.
Reforms of state enterprises were launched in the mid-1990s, with many
transformed into corporations with a formal legal business structure and then
listed on domestic and overseas stock exchanges. China’s accession to the WTO
has sharpened up competitiveness through increased competition on domestic
markets and enhanced access to foreign markets. These factors have led to a
more efficient allocation of labour and capital. Moreover, foreign companies
248 World Energy Outlook 2007 - CHINA’S ENERGY PROSPECTS