A Study of Low Consumption Rate of China:Analysis of Flow of Funds Account of China from 1992 to 2005

The fluctuation of consumption rate is due to the households and government departments.From the data of 1992-2005,it can be seen that the decline of China’s consumption rate is largely due to the household sector,especially in the rural areas.The major reasons for the decline are the increased rural-urban income gap,the residents’ propensity to consume and the decline of the ratio of household disposable income.The changes of the first and the second distribution of national income result in the decline of the ratio of household income to national income and the widening of the gap between the residents’income;both of the two factors have the driving force to the decline of the residents’consumption rate.Although the consumption rate of the government is generally stable,the decline of the propensity of government to consume hampers the rising of consumption rate of the government,and also causes the preventive saving of the households,which lowers the propensity of households to consume.In order to realize the economic development strategy with the rising of domestic consumption rate as the core,it is necessary to improve the national income distribution structure from the two mechanisms of the first and second national income distributions,to reinforce the propensity of the government to consume by setting up the public finance system,and to accelerate the urbanization and stimulate the consumption of the residents,especially the urban residents.