The role of household consumption in the Chinese economy:Input-output analyses

The export growth that contributed significantly to China’s GDP growth has slowed down since the global financial crisis in 2008. Stimulating the effective domestic demand is regarded as a good measure to cope with the weak foreign demand and as an important driving force of China’s future economic growth. Many commentators opine that increases in the demand of 1.3 billion consumers will be key to continued growth of the Chinese economy. This thesis investigates the role of household consumption in the Chinese economy. It focuses on two issues that are relevant for socio-economic research on China. (i) We investigate the short-run effect on China’s GDP of the “4 trillion yuan stimulus package” (which was launched by the Chinese government during the 2008 global financial crisis). We find that this stimulus package could have led to an increase in GDP of more than 3,000 billion yuan, which is 9.5% of China’s GDP in 2008. The multiplier effect is quite sensitive, however, to the response of households in terms of their consumption. (ii) We investigate the impact of massive demographic changes on China’s future occupation-specific labor demand. We find that changes in the consumption bundle of Chinese households will have significant impacts. The share of agricultural workers in total employment will decrease substantially, while the shares of many services occupations and construction workers will grow. Timely adapting to these shifts requires adjustments in education and training policies at short notice