Academic journal article Canadian Social Science

Analysis on China's Low Household Consumption1/ANALYSE SUR UNE CONSOMMATION DES MÉNAGES FAIBLE EN CHINE

Academic journal article Canadian Social Science

Analysis on China's Low Household Consumption1/ANALYSE SUR UNE CONSOMMATION DES MÉNAGES FAIBLE EN CHINE

Article excerpt

Abstract:

Since the economic reform of China in the late 70s, China is going through a rapid economic development, however, the proportion of consumption in the national economy is declining over the past 30 years. In this paper, we first describe the current facts of China's falling consumption rate. Then we propose the factors that lead to this decline and divide them to two categories. One category consists of structural factors, which corresponds to the declining proportion of the disposable income in GDP. The other category consists of behavior factors, and they describe how much the consumption rate is affected by consumer behavior. The research proposed in this paper is based on fundamental statistical data, using time series analysis on Chinese economy as well as international and inter-provincial panel-data analysis. To study on this problem, our research is comprised of two steps. In the first step, we focus on the change of China's disposable income per GDP. In the second step, we study on the change of household consumption as percentage of disposable income.

Key words: Consumption Rate; Economic Structure; National Income Distribution

Resume: Depuis la réforme économique à la fin des années 70, la Chine est en train de connaître un développement économique rapide, cependant, la proportion de la consommation dans l'économie nationale est en déclin au cours des 30 dernières années. Dans cet article, nous décrivons d'abord les circonstances actuelles de la baisse du taux de la consommation de la Chine. Nous exposons ensuite des facteurs qui conduisent à ce déclin et les divisons en deux catégories. Une catégorie se compose des facteurs structurels, ce qui correspond à la proportion décroissante du revenu disponible dans le PIB. L'autre catégorie comprend des facteurs de comportement, et ils décrivent à quel point le taux de consommation est affecté par le comportement des consommateurs. La recherche proposée dans le présent article est basée sur des données statistiques fondamentales, en utilisant l'analyse des séries chronologiques sur l'économie chinoise et l'analyse des données de panel internationales et inter-provinciales. Min d'étudier ce problème, notre recherche est composée de deux étapes. Dans la première étape, nous nous concentrons sur le changement du revenu disponible par unité de PIB de la Chine. Dans la deuxième étape, nous étudions le changement de la consommation des ménages en pourcentage du revenu disponible.

Mots clés: Taux de consommation; Structure économique; Distribution du revenu national

1. INTRODUCTION

Since the economy reform in China, the macroeconomic consumption has declined noticeably, especially in the last 20 years. It has been considered as one often major issues in China's economic structural imbalance. Specifically, China's macro-economic consumption rate declined from 62. 1% in 1978 to 48.6% in 2008, while per household consumption rate dropped from 48.4% from 35.3%. The decline of the macro-economic consumption rate triggered a series of negative consequences. First, there lacks a domestic market for a large number of products made in China, thus they are confined to the oversea markets. As a result, China's economy becomes highly dependent on export. In 2008, the proportion of net export in GDP is up to 8.4%, and export percentage is as high as 41%. The fact that China heavily relies on overseas market to absorb overcapacity, partly leads to global imbalances. Second, inadequate consumption brings high domestic investment.

We demonstrate a run chart of household consumption and government consumption. We can draw a basic conclusion that the decline of China's consumption rate do exist in China's macro-economy. From figure 1 we can see, China's consumption is descending at a constant speed, falling from 48% in mid 1990s to 40% in 2008.

As a result, fix investment raises from 30% before the reform to 45% and then over 50% in recent years. …

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