China’s Real Domestic Consumption and Economic Growth

Abstract

A Vector auto-regression model was estimated using annual data from 1980 to 2014 to assess the causal relationship between China’s real consumption and Gross Domestic Product (GDP). The estimation results suggest Chinese real consumption and real GDP mutually affect each other. This finding suggest that while the People's Republic of China government promotes exports in the age of globalization and the fashionable Washington Consensus Development doctrine, it should simultaneously promote domestic consumption to develop the economy. This empirically supported approach certainly mitigates negative impacts of the international adverse economic conditions on the national economy.