ABSTRACT
In economic development, developing countries in general face the common problem of determining the proper ratio between accumulation and consumption. The establishment of socialist production relations greatly released the productive forces and spectacularly expanded production, creating a source of accumulation. Financially, China relied on its own sources to accumulate capital in the early period after liberation, but technologically, it imported modern equipment and material for economic construction. The people's long-range interest demanded a moderate increase in the level of consumption, which made room for a higher rate of accumulation that will raise the standard of living in the future. Accumulation stems primarily from a rapid increase in production and a reduction in costs. China's stress on accumulation without paying equal attention to investment efficiency was another major factor that caused its economic setbacks. In China, disproportionate allocations of capital funds in certain years aggravated the imbalance between consumption and accumulation.
