The world's fourth-largest economy expanded by nine percent in the third quarter, the lowest level since the second quarter of 2003, the government said Monday, calling for a sharper focus on domestic sources of growth.

"The potential for domestic demand is quite large, and there's considerable room for expanding domestic demand," said National Bureau of Statistics spokesman Li Xiaochao as he released the third-quarter figures.

As China prepares to celebrate the 30th anniversary of its economic reforms later this year, the global financial crisis is forcing it to question how sustainable its export-led growth model is.

In an alarming sign of things to come, thousands of people have been laid off in recent days in southern China's export hubs as toy and other factories that have sold to the developed world have gone bust.

On a macro-level, the nation's trade surplus for the first nine months of the year reached 180.9 billion dollars, down 2.6 percent year-on-year, the customs administration said last week.

This was a major factor in pulling overall growth in the first nine months down to 9.9 percent, making it very likely that this will be first year since 2002 that China's economy expands by less than double digits.

However, shifting to growth based on domestic factors -- consumption and investment -- is easier said than done, argued Ren Xianfang, a Beijing-based economist with consultancy Global Insight.

"It takes more than words to change the growth pattern to a more consumption-driven one. It's a long-standing problem in the economic structure and requires long-term policies," she said.

"China has long promoted an external-oriented economy... The current weakening exports due to the financial turmoil should serve as a wake-up call."

Stepping up investment spending would be the most direct way to boost growth, and data published Monday suggested the government has already started down that road.

Urban fixed asset investments were up 27.6 percent in the first three quarters, compared with 26.8 percent in the first half, according to the statistics bureau.

The figure, which is a key measure for government spending on infrastructure and factories, hit 29.0 percent growth in September alone.

However state-employed economists have already warned against over-applying the pump-priming tool, wary of creating bubbles and useless overcapacity.

"Investment could easily overheat and should be carefully kept at a rational pace," said Zhang Liqun, a researcher with the Development and Research Centre, a government think-tank, according to state-run Xinhua news agency.

Indeed, the government has spent the better part of this decade seeking to rein in local governments building new housing and manufacturing projects, regardless of whether there was demand.

That leaves private consumer spending, which grew by 22.0 percent in the first nine months of 2008, a figure somewhat swollen by high inflation.

It is a more difficult tool to employ as hundreds of millions of Chinese still simply do not have much money, those with cash preferring to save than spend, and almost everyone reluctant to borrow.

"Chinese, unlike many people in the United States, do not consume with borrowed money, so they are not very sensitive to measures such as interest rate cuts," said Wang Qing, a Hong Kong-based economist with Morgan Stanley.

"Changes in monetary policy and other measures do not have much direct effect in terms of encouraging people to consume."

The Chinese could be spending more if it was not for their concern about the future, which forces many to save large amounts of their income in the banks.

"They face major long-term spending on items such as social insurance, housing, health care and education, causing weak everyday expenditure," said Wang.

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