Research On Initial Distribution And Rate Of Consumption In China

Final consumption accounted for around60%of China’s GDP during theseventies and eighties of the twentieth century and it showed a declining trend in thenew century. This rate was47%up to2010. At the same time, however, the finalconsumption rate of the world in the eighties of the last century was80%. Incomparison, it is obvious that China`s final consumption rate is lower than thosedeveloped countries and some of the developing countries such as Russia India andBrazil. If the consumption rate stays too low, it will result in higher savings rate.Accordingly, high savings rate would boost investment. High investment in economymeans an extinctive mode of economic growth which is not only a big waste ofresources but can also leads to imbalance of international payments and an accessdomestic liquidity. These issues have now become huge problems for our country’smacro economy.China’s final consumption can be divided into two parts, one is householdconsumption， the other is government consumption. It has shown that thegovernment part of final consumption keeps gaining strength in recent years, so wecan conclude that the inadequacy in China’s final consumption is caused by theresident part. Household consumption rate decreases with the decline of unevendistribution and residents’ average propensity to consume. But in China the unevendistribution accounts for a bigger part. Expanding consumption plays an importantrole for China’s economic growth and economic growth in transition. Therefore weshould make sure a fair initial distribution and raise the proportion of employeecompensation in the initial distribution,which could not only boost consumption ina large measure, but can also have a positive influence on China`s transformation ofeconomic growth and economic development.Therefore, based on the empirical results, this article suggests that attentionshould be given on the fairness of the initial distribution. And we should raise theproportion of employee compensation in the initial distribution to a standard level, increase employee wage and stick with the development strategy which emphasizesthe priority to employment.