Policy Simulation

Abstract

The final consumption, especially the share of resident consumption in GDP, has kept declining in China, which has been the most significant feature of the structural imbalance of national economy over the past decade. Although series tax cuts and other policies which aimed at stimulating consumption demand have ensured the steady growth of China’s resident consumption to some extent, the structural imbalance has not yet changed completely. Compared to final consumption, the share of investment in GDP has been too high. The contribution rate of final consumption to economic growth continued to drop in 2012, a decline of 3.8 percentage points over the previous year. Therefore, “high investment, high export and low consumption as a share in GDP”, that is, so-called “two high and one low” problem could not be solved in the short term. It requires long term efforts to transform the pattern of economic development and to make final consumption especially resident consumption to be the key driving force of economic growth.