the research for the influence imposed by national income distribution policy on domestic demand tak.doc

1. Introduction
Since reform and opening up China's economy grows at an annual rate of more than 9 percent. GDP increased from 362.41 billion Yuan in 1978 to 210871 billion Yuan in 2006. Average per capita income is more than 3000 dollars. Comprehensive national strength continued to grow. GDP jumped to the total third in the world. The living standards of people improve significantly and made a big leap from poverty to the basic well-off enough to eat and wear. But at the same time rapid economic growth also has brought a series of questions which are showed in the following aspects: first the amount of investment and investment rate stick at a high level. The total investment of fixed assets increased from 89.9 billion Yuan in 1978 to 10999.82 billion Yuan in 2006with an average annual growth rate about 23.9 percent. The ratio of corresponding fixed asset investment accounted for GDP increased from 24.8 percent in 1978 to 52.2 percent in 2006 especially the proportion of straight up since 2003which driving China's economic growth is still investment-driven. Secondly the contribution of consumption to economic growth remains sluggish. Consumption is dejected and apathetic which haven’t make contributions to economic growth. Consumption rates are difficult to continue rising which is 39.4 percent in 1978. It was only 39.2 percent in 2006 while investment rate is 41.3 percent. The contribution of investment to economic growth is much larger than the pulling effect of consumption on the economy. Thirdly high investment and low consumption phenomenon exists side by side makes the gap of income distribution expand unceasingly. Not only the income gap between urban residents but also between urban and rural residents are expanding. The Gini coefficient has exceeded the warning level set by the United Nations. Increase of wage income is far below the pace of economic growth. In 2005 our country’s GDP reached 18 trillion Yuan and national disposable income of urban residents was 4.8 trillion Yuan but the total amount of wages was only 1.9 trillion Yuan accounting for only 11 percent of GDP. While ratios of gross payroll of other comparatively standard market economy country and region laborer to GDP are commonly between 54% and 65% (In 2005 the ratio of the United States was 58.3%. and 53.8% in Germany 55.3% in United Kingdoms).We think that this three kinds phenomenon appearing in macro-economy operation are not isolated absolutely but exist some kind of contact. China's economic growth with low consumption of high investment return to their roots in the severe inequality of income distribution. The cycles of China's economic growth lie in the income distribution high consumption of low-income residents with limited funds the consumption of high-income residents with low-consumption and the high wishes of investment. These results are bound to lead to the phenomenon of high investment with low consumption in the economy. In fact from the view of macroeconomic both investment and consumption are subject to demand while demand is subjected to the impact of income distribution. At the current time of global economic crisis the Chinese are facing a macroeconomic environment of serious shortage of foreign demand. Therefore stimulating domestic consumption and expanding investment in infrastructure construction have become an important means of stimulating domestic demand. Therefore from the perspective of income distribution this paper combs relevance historical document and brief summary the current researching situation between income distribution consume and investing and set up a macro-economic model including the dynamic and complexity relationship between them. On this basis this paper does empirical analysis of the situation since reform and opening up. At the same time it makes the macroeconomic policy recommendations of adjusting the way of the allocation stimulating people's consumption and investment.