The Practicability Of Consumption Led Economy Essay

1378 Words Nov 12th, 2015 null Page
The Practicability of Consumption-Led Economy Based on some basic statistics, such as per capita GDP and the growth rate of the urban population, Fukumoto and Muto (2012) focus on the likelihood that present-day China is roughly at the same stage of economic development as Japan during or prior to the early 1970s. In the 1970s, Japan transformed its economic growth model from investment-led to one led in a more balanced manner through investment, consumption, and exports. Thanks to the transformation, Japan was able to maintain its stable economic growth after the high growth era of the 1980s. Thus, in order to duplicate the success of Japan to maintain its high economic growth, Fukumoto and Muto highlight the importance for China to transform from an investment-led to a consumption-led economy. This section focuses on analyzing the sustainability of consumption and explaining why consumption is able to maintain China’s economy in the long run. Lardy (2006) points out that since the beginning of 1990s, the consumption growth, as a source of economic growth, has diminished substantially compared with other sources, such as investment and exports. Specifically, household consumption dropped from slightly more than half of GDP in the 1980s to an average of 46 percent in the 1990s. After 2000, household consumption kept decreasing. By 2005, it only accounted for 38 percent of GDP, the lowest share of any major economy in the world. From the beginning of the decade until the…

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