Consumption, Investment And Economic Growth

The Chinese economy has made many brilliant achievements since three decadesof the reform and opening up, but in this miracle behind the rapid growth, we shouldhave a good think of the development of the Chinese economy in the future. The rapidChinese economic growth is mainly driven by investment, and the drawbacks oflacking of consumer demand is emerging, which allows us to have to think about therelationship between investment and consumption, and its essence,the dynamicefficiency of the real economy,lies in the level of capital accumulation, that wasstudied by the test.This test used of Western economics, the theory of dynamic efficiency, theapplication of improved AMSZ criteria (mainly remuneration to re-explain), directcomparison of total consumption and total labor compensation, and co-integration testand other methods. This test studied the Chinese dynamic economy from year1985to2008, and found that the Chinese economy as a whole during this period showed thedynamic and effective, but since the21st century is to be dynamic invalid and hasfurther deterioration.The study measured and calculated the optimal investment rate lies in0.333-0.376, while Gini coefficient lies in0.2-0.3and the investment rate meets thedemand of dynamically efficient state. The study also analyzed the reasons for thissituation including inadequate consumption and low capital marginal rate, and thisstudy regarded the former as more important. At last, meaningful policy proposalswere offered which were based on the obtained test results, such as improving theconsumption environment, stimulating consumption, encouraging technologicalinnovation and policy recommendations.