A Study On The Imbalance Between Chinese Residents' Consumption And The Distribution Pattern Of National Income

Consumption, especially household consumption has been lagging behind economic growth in the process of China’s profound economic and social transformation. This household consumption problem not only implies the singleness of economic development mode, but also reflects our residents do not share the fruits of economic growth, which will become the negative factors hinder the comprehensive, coordinated and sustainable development of China’s economy.This paper examines the role played by the distorted distribution of national income on China’s household consumption puzzle, and explores the reasons behind the national income distribution distortion, including the decreasing of labor income share and a very low level of household property income, from the aspects of market-oriented reform and financial development. And finally it will come to the policy proposals to improve the national income distribution and enhance household consumption rate.Basing on a careful review of the related literatures, and using China’s provincial panel data and the flow of funds accounts, I apply the proper statistical and econometric tools to do empirical study on a series of related topics, I find:1. From the historical point of view, China’s household consumption rate has experienced a dramatic decline since1990s, and which is significantly lower than other countries from the international comparison.2. The household consumption rate will show a U-shaped trend during the economic development.3. The labor income share, the degree of urbanization and privatization can exert a significant and positive influence over the household consumption rate, and the degree of aging has a negative impact on the household consumption rate.4. The household consumption rate can be decomposed into two aspects as "consumption willingness" and "consumption ability". The explanatory power of these two aspects on household consumption rate is generally the same.5. The distortion of primarily national income distribution serves as the main reason of the household low "consumption ability", and the distortion of national income redistribution serves as secondary reason.6. The declining labor and property income share results in a disadvantage role of the household sector in primarily national income distribution. And the increasing income tax burden and the decreasing net social welfare lead to a disadvantage role of the household sector in national income redistribution.7. Market-oriented development, including reducing government intervention in business and enhancing labor mobility, has a significant and positive impact on labor income share.8. Financial development, especially the enhancing of Marketization of credit funds allocation, can exert a significant and positive influence over household property income.Finally, according to the results of theoretical analysis and empirical research, combined with China’s national conditions, a set of public policy program is committed to enhancing the household consumption rate.1. I propose the market-oriented development strategy to enhance labor income share in the perspectives of changing local governments’incentive structure, breaking the monopoly of state-owned enterprises and promoting political system reform.2.1propose the financial development strategy to enhance property income in the perspectives of developing capital market, improving financial resource allocation efficiency and the rule of law.3. I propose policy recommendations on improving primarily national income distribution from the point of view of reforming wage determination system and state capital revenue distribution system.4.1propose policy recommendations on improving national income redistribution from the point of view of reforming personal income tax system and social welfare system.5.1propose other policy recommendations on improving household consumption rate from the point of view of advancing urbanization, adjusting public expenditure structure and the regulation policies on real estate market.This study helps us to have a deeper understanding of the underlying causes of China’s household consumption puzzle, and the institutional roots of the national income distribution distortion. At the mean time, this study also has a very important practical significance on promoting transformation China’s economic development, and facilitating comprehensive, coordinated and sustainable social and economic development.