The Mystery Of China Marginal Consumption Falling Tendency

At the period of the transformation from the plan economic mechanism to the market mechanism, people of our country get their personal income in more ways and facing more investment and speculation chances. As the restriction of the liquidity being removed, the ability of controlling the consumption demand is weaken and the fluctuation of the influence to gross domestic product get more frequent. The short of the domestic consumption demand has become a key obstacle for the development of our country's economic.The international absorbs theory think that under the condition having the unused resource being left, with the domestic income increasing by the absorption at the same time and the marginal propensity to absorb lower 1 , the current account will expand unceasingly. After my measurement of the marginal propensity to absorb of China from the time of reformation and opening, I find that it turned form over 1 to lower 1 at the middle of the 90s and get the conclusion that the main reason of the turning is the decreasing of the marginal propensity to consume. For this reason, the solution to the decreasing of the marginal propensity to consume at the middle of the 90s provides a basis of policy making to solve the problems of balancing development from inside and outside.There are lot of factors that cause the decreasing of the marginal propensity on this paper. According to the western consumption theory and our country's situation, I chose the income, the real interest rate, the structure of the young population and the fluctuation as explanatory variables. Through the extension of the consumption model from Campbell and Mankiw(1987) and the method of tool variables, this paper did an quantitative analysis by employing the sectional time test method. The result is to be found that with Chinese economic reform deepens, Architectural change happened in Chinese resident consumption behavior,the factor has different effect under the different period,the particularity from the change of the income, real interest rate and the structure of the young people in the middle 90s were the most importance factors that causing the decrease of the marginal propensity to consume and explanation of the mystery of china marginal falling tendency.This paper draw a basis conclusion that Population policy of our country has formed the population structure particularity,the consumption habit and motive of the young population set great influence to the consumption, so the research on the purpose at the macroeconomic area. In turns, the interest rate is important to the consumption, While lifting the control over nominal profit, it should pay attention to a curbing inflation, and it will be a feasible policy instrument for the central bank. I provide some corresponding suggestions on this paper, too.