The Way To Realize Consumption-led Economy In China’s Economic Transformation Period

After the financial crisis, the disadvantages of the export-and–investment-led economy patternhave gradually appeared. And there are a lot of discussions and issues about consumption-ledeconomy, and the researchers are focusing on how to achieve it in China. This paper is based on thenumerous scholars’ researches. Firstly, introducing the concepts of consumption-led economy, thepaper gives the definition of consumption-led economy that is suitable for China. And it tries to findout the consumption influences from consumption functions. Secondly, after analyzing theeconomic pattern changes in China’s reform and opening-up, this paper points out theunsustainability of export-and–investment-led economy pattern. At the same time, it demonstratesthe feasibility of the consumption-led economy in China at present. Thirdly, the paper analyzes theinfluences of China’s consumption according to the economic reality of our country, and it provesthat it is necessary to achieve the consumption-led economy pattern in China. Then we build a VARmodel to analyze the income, Gini coefficient, the level of social security and the rate ofinvestment’s impact on the key variable of consumption-led economy—the rate ofconsumption-driven, which is based on the yearly time series in the period of1978~2011. Usingcointegration and impulse response function, this paper analyzes these factors which can improvethe consumption-driven rate and the way to influence it. Finally it points out that how to realizeconsumption-led economy in our country. This article draws the following conclusions on the basisof the previous analysis: consumption-led economy can be achieved by improving residents’disposable income and narrow the income gap, improving the level of social security, and reducingthe rate of investment. One of the main ways to improve the rate of consumption-driven is toincrease income.