The Consumption-Driven Economic Growth Model

Abstract

The Eighteenth National Congress of the Communist Party of China (CPC) has clarified that an urgent task for China’s development is to focus on transforming its investment-driven economy into one driven by consumption . In other words, China’s economic progress will rely increasingly on domestic need, particularly consumer demand. This transformation is due in part to the 2008 global financial crisis, followed by the European debt crisis and the US recession, which suppressed global demand for Chinese exports. In addition, national protectionism is on the rise worldwide, restraining Chinese exports in the guise of “anti-dumping” and “countervailing” measures. Coupled with the appreciation of the RMB against the US dollar, China can no longer count on external demand to develop its economy.

This article was first published under the title “Consumer Demand, Purchasing Power: A Consumption-Driven Economy and Economic Growth” in the journal Economic Issues in China, 1 (2013), pp. 3–8. It has been revised and updated for this volume.