Impacts of Household Consumption on Economic Growth

Abstract

As China shifts from an investment- and export-driven economy to a domestic demand-oriented one, household consumption has emerged as the major driver of economic growth. By reviewing the historical development of China's economy, this paper reveals the significance of household consumption during this transformation period. This paper finds that the increase in household consumption not only stimulates market demand but also motivates companies to expand production and increase investment, thereby propelling a virtuous economic cycle. Meanwhile, it promotes the optimization and upgrading of consumption structure, specifically manifesting as the transformation of the consumer pattern from spending more on essential items to spending more on high-quality, personalized goods and services. This process has significantly improved people's quality of life and facilitated the innovative development of relevant industries. Based on the analysis of China's current economic development, this paper proposes that the government should emphasize the optimization of the consumer environment and introduce inclusive policy, thereby effectively driving consumption upgrading and economic growth.