Amid economic woes at home and abroad, Chinese growth still hit a robust 7.8 percent in 2012, even though it's the country's slowest rate since 1999.

After dipping to a seven-quarter low of 7.4 percent in the third quarter of 2012, the economy has shown signs of stability while GDP growth rebounded to 7.9 percent in the last quarter, said Ma Jiantang, Commissioner of the National Bureau of Statistics (NBS) at a press conference on January 18.

Among the 51.93 trillion yuan ($8.36 trillion) of the GDP in 2012, the service sector experienced a rise, its added value contributing 44.6 percent, 1.2 percentage points higher than the previous year.

While the export engine lost steam due to anemic demand on the global market, domestic consumption contributed 51.8 percent to China's economic growth in 2012, with investment adding 50.4 percent, and exports -2.2 percent.

In addition, China made progress in energy saving and emission reduction. Energy consumption per unit of the GDP dropped by 3.6 percent in 2012, compared with 2011's 2 percent. Natural gas, hydropower, wind and nuclear power accounted for 14.5 percent of total energy use, 1.5 percentage points higher than the proportion in 2011, according to Ma.

The Central Economic Work Conference held in December 2012 prioritized quality and efficiency of growth over its speed for the first time. The slowing growth rate and changes in growth patterns during 2012 indicate the country's economy is heading in this direction.

New growth engine

As exports received a heavy blow from a sluggish global economy, domestic consumption has taken the baton to become a new lifesaver for a slowing economy.

Retail sales of consumer goods totaled 20.72 trillion yuan ($3.33 trillion) in 2012, increasing 12.1 percent from 2011.

Chinese purchasing power was on full display in 2012, illustrating the potential for increased domestic consumption as the country attempts to shift its economy away from a reliance on investment and manufactured exports.

The per-capita disposable income of China's urbanites increased 9.6 percent in 2012 to 24,565 yuan ($3,953), while per-capita net income of farmers was 7,917 yuan ($1,274), up 10.7 percent, said the NBS.

Growth in consumption was also due to government incentives.

Money collected from personal income tax dropped 8 percent in 2012, while the individual business income tax declined 12.5 percent during the period, according to the State Administration of Taxation.

The government has stepped up tax reduction efforts over recent years in a bid to buoy the economy. In 2011, it raised the income tax exemption threshold for wage-earners and those owning individual businesses.

"China's growth opportunities have changed. Domestic consumption has replaced external demand to become a new means of economic growth," said Lian Ping, chief economist of Bank of Communications.

"Alongside the fast development of per-capita GDP, urbanization and the country's central and western regions, a new window has been opened for China's economic growth."

To unleash the potential of domestic consumption, the country should improve income distribution and its social security system, which would ease the effect of sluggish exports on China's economy, said Lian.

"China should make further reforms on its income distribution system to enhance the proportion of residents' income against national income," said Li Wei, Director of the Development Research Center of the State Council, at the Forum on China's Economic Outlook held in Beijing on December 29, 2012.