Demographic Structure’s Impact On China’s Average Resident Consumption Propensity

Since we have followed the policy of reform and opening-up, a few structural issues aroused, such as the increasing dependence on foreign trade, the excessive investment rate and saving rate, wide income gaps and so on. These problems which are greatly needed to be tackled eventually leads to the core problem, the low average residents’ consumption propensity and the declining marginal residents’ consumption propensity. China is confronted with the pressure of lagging domestic demand right now. In the meantime, some obvious changes happened to the demographic structure in China. It is of great necessity for the whole society to pay attention to the influence that the changes of demographic structure had, especially for the resident consumption propensity. After explaining the influencing mechanism that involved demographic structure and resident consumption propensity, based on the panel data of 31 provinces in China during 2003 to 2012, this paper applies both stable and dynamic model for the empirical analysis about the relationship between demographic structure, including a series of variables like age, sex, education, marriage status and household scale, and the weakening resident consumption propensity. In the dynamic analyzing part, the difference and system GMM estimation are applied. The results show that, the relationship between age structure and resident consumption propensity is positive, while the education status and the family size’s effect are negative. The sex structure has a negative effect just in household level, while marriage status has weak and unstable influence. Therefore, this paper suggests that to increase the disposal personal income is the first choice and reducing the tax burden can be promising. Secondly, pension system should be promoted to raise the society security level, in order to enhance the consumers’ confidence. Thirdly the lower birth rate should be noticed, and the policy of family planning should be loosened to raise the birth rate and ease the problem of gender imbalance.