The global economic crisis has caused a sharp decline in China's exports, placing renewed pressure on Beijing to raise domestic demand, particularly household consumption. With net exports accounting for 20-25 per cent of its growth in the past five years, China will have to increase domestic demand significantly to compensate for the loss in external demand.

Although this challenge has acquired greater urgency today, it is not new. Chinese policymakers and Beijing's biggest trading partners have been warning about the massive imbalance between the country's levels of exports and domestic consumption.

In 2007, China's current account surplus, a key indicator of this imbalance, was $372bn (€275bn, ￡250bn), the world's largest in absolute terms. With global trade in its worst slump since the second world war, Beijing is now paying for policies that have consistently accorded higher priority to exports than household consumption.