**1. Introduction**

Since the reform in 1978, China's economy has experienced nearly 30 years of rapid growth. According to the data from the National Bureau of Statistics of China [1], China's per capita GDP growth rate was 8.4% from 1978 to 1999, and per capita GDP reached \$840 in 1999, marking the entry of middle and lower income countries. From 2000 to 2010, the average annual growth rate of per capita GDP was 9.7%, and per capita GDP rose to \$4240, successfully ranking among the upper and middle income countries. But since 2011 the previous investment and external trade-oriented development pattern seems to have reached its limitation. Similar to the typical stagnant growth countries in Latin America and emerging economies in Southeast Asia, such as Malaysia, the Philippines, and Thailand, which is known as the "middle income trap" [2]. China's economic growth has also slowed down. From 2011 to 2018, GDP growth rates were 9.5%, 7.8%, 7.7%, 7.3%, 6.9%, 6.7%, 6.9%, and 6.6%, respectively. Therefore, the Chinese government announces that China's economy has shifted from high-speed growth to a "new normal" dominated by medium- and high-speed growth, and scholars become more concerned about the future trend of China's economy and its sustainability. The core

issue is whether the Chinese economy will further decline and when it can successfully cross the "middle income trap".

In fact, one of the fundamental reasons for being trapped in the "middle income trap" is that, after a country has completed rapid development from a low-income level to a middle-income level, the internal structure of its economic system has not been optimized autonomously with the improvement of production levels, making endogenous growth factors unable to support economic development to a higher level. Therefore, the essence of the "middle income trap" is a problem of the transformation of economic growth mode. The key to crossing the "middle income trap" is to find new combinations of economic growth factors and improve the structural quality of the economic system. As the ultimate goal of social production, consumer demand plays an exceptional role in the process of transformation [3].

Firstly, after reaching the middle income level, labor factor as one of the three basic factors is the key to optimize the combination of factors and ultimately improve the efficiency and quality of economic growth. The improvement of consumption level reflecting the living standard of residents can improve the overall quality of labor force from many aspects. The corresponding technological innovation will also increase with the improvement of the quality of labor force, which will produce a qualitative leap in the productivity of input factors, effectively promote supply-side reform, and provide a source of power for economic growth. Secondly, the continuous upgrading of industrial structure is an important part of the transformation process of economic growth mode. The improvement of consumption level puts forward higher requirements for product quality and supply structure, which can play a guiding role in the optimization and upgrading of industrial structure and improve the quality of economic growth. Finally, the consumption-oriented mode can guide the optimal allocation of resources, improve the level of marketization, make social distribution more equitable and reasonable, and ultimately promote the sustained and healthy growth of the economy.

Moreover, the international experience of economic development has also fully affirmed the role of consumer demand in driving economic growth. Saito [4] and Horioka [5] studied the causes of Japan's economic slowdown, and found that insufficient consumption was an important factor in slowing down economic growth. At the same time, from the economic performance of developing countries after 1956, the degree of attention to consumption largely determined the economic development speed of each country. Munir and Mansur [6] theoretically proved that the improvement of consumption level, as one of the driving forces of GDP growth, can promote the growth of a country's economy. Using international data starting in 1957, Eichengreen et al. [2] construct a sample of cases where fast-growing economies slow down. Their results suggest that a low consumption share of GDP is positively associated with the probability of a slowdown, although there is no iron law of slowdowns. Liu and Wang [7] based on 32 samples from developed and developing countries, using panel smoothing transfer regression model, obtained a consumption rate of 68.12% which is most conducive to promoting economic growth.

Chinese government is also gradually realizing the importance of consumption to long-term sustainable economic growth [8], with the emergence of overcapacity, a slowdown in growth, and a series of other developmental problems. Unfortunately, China is also facing a big consumption problem, that is, insufficient domestic demand. According to the World Bank's World Development Indicators [9], China's final consumption rate reached 63.6% in 2000, close to Liu's optimal level [7], but then continued to decline to 48.1% in 2010. Although it has improved since 2011, it has only increased to 52.6% by 2017, which is far below the theoretical optimum level. Excluding government consumption, the resident consumption rate has also continued to decline since 2000 from 46.7% to its lowest point of 35.6% in 2010, although the recent rate has rebounded but only minimally. The Chinese government has called for rebalancing the economy towards greater reliance on consumption as the driver of growth and implemented a series of positive policies to expand domestic demand, but so far

these have had little effect. So, the main purpose of this paper is to analyze the internal mechanism of why China's consumption demand has not fully promoted economic growth.

Further, in sharp contrast to the lack of consumer demand, there has been a series of consumer booms in single markets, such as real estate, cars, Apple mobile phones, and other high-tech digital products, and Chinese consumers have been eager to purchase some goods that are booming overseas, so inadequate domestic demand is not the whole question; Chinese residents still have a strong consumer potential. We see a "lack of overall demand but strong local demand" coexistence phenomenon. So, we believe that there are certainly deeper reasons for the special economic operation phenomenon caused by the accumulation of deep-seated flaws in China's economic growth.

The most direct way to stimulate consumption is to increase residents' income, but the unequal promotion will widen the income gap and is not conducive to consumption. The drastic change in income distribution of billions of people is a significant special factor that distinguishes China from other countries. The income distribution here refers not only to the income gap that can be expressed by variances but also to the whole income distribution curve characteristics such as mean, skewness, and kurtosis. Moreover, the successful experience of Korea and Japan in crossing the "middle income trap" tells us that the formation of stable, reasonable and strong consumer demand is inseparable from the sustained growth of household income and reasonable income distribution [5,10]. Therefore, the final specific research objective is to study the impact of income distribution changes on the consumption structure.

Based on the perspective of the income distribution change, this study holds that the abovementioned "lack of overall demand, but strong local demand" that coexists with the consumption structure problem is mainly caused by the imbalance between the demand structure and the supply structure, and the rapid evolution of the demand structure is the dominant factor in this contradiction. The effects of the three dynamic characteristics of the income distribution on the consumption demand structure are called the mean effect, variance effect, and residual effect, respectively. The mean effect mainly reflects the effect of the overall income level on the whole consumption structure. The variance effect and the residual effect collectively reflect the effect of the income gap on the consumption demand. However, the residual effect reflects a symmetry heterogeneity effect that is caused by the differences of region and human capital. This study calls them "the demand effects of residents' income distribution change."

In the perspective of income distribution changes, the question of how to expand the domestic demand and realize the transformation of economic growth driven by consumption is transformed into the question of how to form a reasonable consumption structure, which is, of course, affected by the change in the income distribution. Accordingly, once the relationship between the income distribution and consumption structure is sorted out, the problem of insufficient demand can be solved at the source, which is of great significance to the structural reform and sustainable growth of China's economy.

The rest of this paper is as follows. The second section is about review of literature. The third section is the derivation of the AIDS dynamic expansion model. The fourth section is the description of the data and construction of the indicators; the consumption and income data related to the urban residents in the Chinese Statistical Yearbook are selected. The fifth section is the empirical test, where the influence of income changes on the consumption demand structure is measured and discussed. The sixth Section gives the conclusions and the consequent policy recommendations.
