The Change of Demand Structure and the Dynamic Evolution of Industrial Structure in China—On China’s Deindustrialization Issues

This study mainly discusses how the change of final demand structure affects the dynamic evolution of the industrial structure in China. Based on the input-output analysis, an LMDI decomposition model is constructed, and the main factors that influence the change of industrial structure in China during a long period (1997—2018), as well as two short periods (1997—2008 and 2008—2018), are analyzed from an empirical point of view. The study found that both in the long period and two short periods, only the direction of industrial structural change induced by the change of ‘demand mode’ is highly consistent with that of the three industrial structures on the supply side, which indicates the changes in the two specific aspects of final demand are the principal factors to the change of industrial structure in China. In the structure of the two specific demands, the change of industry structure in final demand plays a more significant role than that of the overall structural change. From a further analysis, among all variations of final demand, the domestic consumption contributes the greatest impact, and domestic investment follows, but the exports of intermediate goods and final goods play the least significant role. With a trend that domestic consumption is increasingly becoming the main driving force of China’s economic development, the increasing proportion of China’s tertiary industry’s value added will be a long-term development trend. And moderately expanding the scale of investment and export in final demand can postpone the decreasing trend in the share of secondary industry in China’s economy, especially the ‘too early and too fast’ declining trend of manufacturing.