ABSTRACT

Since the “Seventh Five-year Plan,” China’s rate of consumption (the proportion of final consumption in GDP) has been in continual decline. However, this trend has generally been masked by changing price levels, and has therefore tended to go unnoticed. At the same time, average family income has fallen seriously behind GDP growth over this period, though this too has been masked by price change factors. If we put aside the influence of these price changes, we can easily deduce the real cause of the current insufficient demand. We thus reach a new understanding of all the important economic relations by analyzing constant prices in the country’s economy since the beginning of the reform and opening up.