A Study On The Reasons Of Inadequate Consumption Demand Among Chinese Residents

Expanding domestic demand, especially consumption demand expansion is an urgent problem need to be solved. Although China has implemented the strategy of expanding domestic demand since 1998, but now, China's final consumption rate and residents consumption rate are still declining, the effects of the policies are not so obvious. We can say inadequate residents'consumption demand both in theory and practice are not yet fully resolved. At the same time, China's national income distribution structure and income distribution gap is also changing, how this change affects residents'consumption demand is a major problem we facing. This article is based on Consumption Theory of Marxism, Keynes'Consumption Theory, Life-cycle Theory and Permanent Income Hypothesis (PIH) to study the issue and then find out the reasons for lack of residents'consumption demand.Firstly, the article analyzes the changes of government's, enterprise's and household's share in total disposable income after primary distribution and redistribution, the trend that reflects the source and utilization of disposable income for all sectors, changes of urban-rural income growth and income gap between urban and rural residents. Then, followed by the application of theory to analyze why these trends lead to inadequate residents consumption demand, at last, the paper makes the following conclusion:The household sector's disposable income share in total disposable income after primary distribution being declined is one of the main reasons that cause the lack of residents consumption demand in China. Which declined in disposable income is mainly caused by the decrease of laborers compensation and property income. Decreased proportion of laborers paid of the household sectors is caused by laborers compensation fall which is paid by the enterprise. At the same time, employment growth slow and the decline in labor union power also makes the laborers compensation can not be improved. The relative decline of household sector income share in the process of national income redistribution is not leading to inadequate residents consumption demand. Government did not play fully in the redistribution mechanism to improve society's income distribution is the result of inadequate residents consumption demand. The relatively low wage growth rate of urban residents in China, the uncertain income of rural residents and urban-rural income gap are other reasons caused the lack of residents consumption demand. Finally, policy recommendations are given on improving residents income and changing the structure of fiscal expenditure.