A Study On Interactive Relationship Between Domestic Demand And Foreign Demand In The Economic Growth Of China

Chinese scholars have some different views about the economic growth mode ofChina since reforming.Some ideas show that Chinese economic growth mode istypically generated by foreign demand through maintaining low exchange rate.So thegrowth is highly depended on investment and export which has generated muchserious internal and external imbalance. But some other views indicate that Chinesemode is a domestic demand growth pattern because each stage of growth engineswitching is accompanied with the consumption structure upgrading. We need toprovide obvious evidence to explan what kind of economic growth mode in China isin the past30years clearly.This paper try to solve two major problems basing on the new open situation ofChinese economic development and domestic demand expanding policies background.the one, The current economic growth mode of China is whether being foreigndemand or domestic demand driven; The other, the role of domestic demand andforeign demand and their interactive relationship in economic growth processing ofChina. The domestic demand expanding policies don’t mean that we must compressedforeign demand necessarily, maybe the relationship goes the harmonious developmentboth inside and outside. This paper calculate domestic demand and foreign demandcontribution to the economic growth of China in1978-2009, and try to construct themathematical function for the relationship between domestic and foreign demandthrough establishing the modified Keynes investment function.Then, this essayanalyze the influence and relationship between domestic demand and foreign demandby regression method, cointegration method, Granger causality test method with the npanel data estimating method with the30provinces panel data systemly.The contribution calculating result shows that domestic demand play the mainrole in economic growth of China, domestic demand is more important than foreigndemand in the1980s, but foreign demand boost economic growth processing byplaying an increasingly important role in the1990s. The empirical results basing onthe panel data show that government spending has played a significant role topromote the output, meanwhile the output growth and export also promote each othersignificantly, if the domestic demand expanding policies result in more governmentconsumption, urban consumption or the increase of investment, so will promote netexports directly. So the foreign and domestic demand will promote the economicgrowth together which is so-called double driven mode. Finally, several policies and suggestions are proposed by the writer basing oncalculating results and empirical analysis.