The Welfare Cost Of Slowdown In China’s Economic Growth: 1985-2013

Since the reform and open-up policy has been carried out for over 30 years, China, the country whose economy has been growing rapidly with high economic growth rate, has obtained great achievements. Now, China has great influence on the economy of the world that all countries have to pay their attention to China. However, the growth of China’s economy will inevitably slow down because of the unsustainable economic growth model, such as the large consumption of energy, the pollution of the environment and the demand driven by investment. Especially after the financial crisis in 2008, China is facing a much more complex international environment, whose economy is stuck in the "NEW NORMAL". In such a situation, residents’income is greatly affected, thus their expectation of consumption goes down, as well as their welfare. So the government has to pay its attention to the results from the slowdown of China’s economy. Considered the difference between urban and rural areas, residents in China are bound to suffer from different cost of welfare. Therefore, it’s very necessary and significant to estimate the welfare cost of heterogeneous residents.This article selects the national and 29 provinces’consumption expenditure of urban and rural household as the research indexes. Based on Lucas’s model, this article analyzes the consumption data of urban and rural household in the period of 1985-2013.To compare the welfare cost of the urban and rural residents in the three periods of 1985-1994、1995-2005 and 2006-2013, all in all, this article shows that urban and rural residents’welfare cost are cutting down as the reform of China’s economic system goes successfully. By comparing the welfare cost of urban and rural residents, the result indicates that rural residents will stand larger welfare cost than urban residents. As for the provincial urban and rural consumers, rural residents will stand larger welfare cost than urban residents. Within each province, it happens the same, In order to make the system of economic transform and the economy runs right, the government should choose the proper policy between high economic growth and the minimized welfare cost.To a degree, the following policies could be considered as a reference.(1) Deepen the reform of economic system, expand opening to the outside world. (2)Develop the economy of middle and west regions, improve the welfare of rural residents. (3)Improve the income distribution system. (4)Offer more public service to rural regions. As usual, most of scholars in the world have quantified welfare cost of residents with the annual data of aggregate consumers. In fact, the urban and rural residents’welfare cost may be different because of the basics difference between regions. At the same time, the scholars in China usually choose residents’ consumption level as the research index, but this article argues that household consumption expenditure is more suitable to quantify the welfare cost of residents.Put it another way, this paper thinks the slowdown of China’economy will bring about negative effect, residents will suffer more welfare cost. The government have to change the model of economy to make it more environmental and technological instead of the large consumption of energy and the pollution of the environment. Also, this article assumes that 1% slowdown in China’s economic growth, which is not realistic. This article have to estimate a more reasonable figure due to the short of statistical data. However, the result can still reflect the differences between residents’welfare cost in regions. Besides, this paper does not do the research, because of the failure to obtain the data of aggregate household consumption expenditure and provincial household consumption expenditure. But, by using the data of provincial urban and rural household consumption expenditure, this article learn the trend that the residents’welfare cost are enlarging could support the conclusion.