The Change Of The Resident's Consumption Demand And The Propensity To Consume In China

The topic of this paper is the consumption demand and the propensity to consume since the reform and opening in China. In recent years, the saving rate has been increasing and consumption rate has been dereasing, the lack of consumption demand has become the encumbrance to keep on the economy growth in our country. So this paper tries to analysis the trend, the reason, and the effect of the consumption demand change, and find effective policies. China is a huge developing country, the dual characteristic of economic structure is very obvious, the economic development is very unbalanced between the rural and urban. And the economics system is in the process of transition. So to study the consumption change in China can offer new reference to consumption theory.This paper starts with the theoretical summary, giving the analysis frame of the consumer behavior, then applies the empirical data and econometric analysis method, to describe the fluctuant tendency and characteristics of resident consumption demand with the different periods and areas in China. And it analyses the effects on consumption demand and propensity to consume through the income distribution, the precautionary saving and the liquidity constraints. It adopts the qualitative analysis in the determining factors, combining the case study. At last it concludes the main conclusion and policy meaning.This paper tries to innovate as three follows. The first, it analyses the consumption demand and the propensity to consume with different areas. Because of duality of economic structure, the income gap is distinct between urban area and rural area. At the same time, because of the regions unbalance, the gap of economic development is big between the eastern region and the western region; therefore it should consider the gap between urban area and rural area, and the gap between different regions when we discuss the consumption. The second, this paper pays attention to the effect of institution on the consumption. The economic reform makes China into the process of institutional change and reconstruction. The change of consumer behavior must be caused by institutional reform, organization innovation and idea change. It must cause the change of the relation between consumption and its factors. Therefore considering the institutional factors is inevitable and adaptive to the situation of our country. The third, this paper analyses the change of the resident's consumption demand and the propensity to consume from the income distribution, precautionary saving and liquidity constraints.Since the reform and opening, gross consumption has changed stageably along with the policy execution, and consumption structure has promoted to higher grade continuously. At the same time, because of the development gap between urban area and rural area, the gap of consumption level and structure has been enlarged. Using the regression method, we found that the resident's APC changed gently. In many years, the APC of the urban residents was higher than the rural residents. The resident's MPC changed was fluctuant, especially the rural resident. The MPC of the urban residents has been continually decreasing since 1985, although in some years, it moved up slightly, the increasing rate was slow and could not keep on. It is hard to compare the MPC between the urban residents and rural residents, it has no rule.The resident income is a direct factor to affect consumption. The income level has effect on gross consumption and consumption structure, the income distribution has effect on the propensity to consume. According to Friedman's permanent income hypothesis, the income is divided into the permanent income and the temporary income. With the regression analysis, we discover the consumption is sensitive to permanent income's change, whether the urban resident or rural resident. The sensitivity of temporary income is weaker. Along with the improvement of the income level and living standard, the consumption structure has promoted to higher grade continuously in our country...