The Empirical Analysis Of Influencing Factors Of The Chinese Rural Residents' Consumption

Since the reform and opening up, China's economic restructuring strategy has scored great success; however, structural imbalance caused by insufficient domestic demand has not been completely resolved. In particular, the consumption rate is strikingly low in the vast rural areas, threatening the long-term and healthy growth of China's economy. The problem is complicated with the coming of post-crisis era for world economy as well as the deepening and widening of China's reform. Therefore, in-depth study of the factors influencing the household consumption in rural areas and of their mechanism is a subject with realistic significance and rich policy implications.I. Main ContentThe article makes empirical analysis on the influence of income level and structure, social security expenditure, financial support for agriculture, monetary policies and other factors on household consumption in rural areas by reviewing the historical records and realistic features of household consumption evolution in rural China and by building the models in ways of dynamic panel and structural VAR models on basis of collecting, summarizing the consumption research theories and related empirical data. It also discusses the reasonable space as well as effective methods for the government to spur rural household consumption, and then proposes policy recommendations with clear focuses. The article consists of four parts:The first part is an introduction on research background and significance, in which the main content, structure, thread of basic thoughts and methods for this research are designed and the major innovative ideas and the problems to be studied are summarized. The second part includes Chapter 2 and 3, which lay a foundation for the empirical analysis in the following paragraphs by sorting out and commenting on the household consumption theories as well as related empirical data both at home and abroad and by describing, analyzing the statistical characteristics of household consumption in rural China. The third part covers the chapters from 4 to 7, making empirical analysis from the perspectives of income level and income structure of rural households, social security expenditure, financial support for agriculture, as well as monetary policies and examining the influence of relevant factors on household consumption in rural China. The forth part is about the conclusions and policy recommendations, in which the conclusions of the empirical analysis are summarized, and policy recommendations on spurring the rural household consumption are advanced.II. Conclusions1. Boosting rural household consumption and unleashing the potential spending power are the focuses of the efforts to expand domestic demandBetween 1978 and 2008, household consumption in rural China continued to show an upward tendency, and the consumption structure was kept upgraded and optimized. At present consumption has changed from the quantitative expansion to seek adequate food and clothing to qualitative improvement to seek development and comfort, and there exists enormous space for further upgrading in the future. However, in view of the overall situation, the growth rate of rural household consumption is lower than that of urban household consumption over a long period of time; meanwhile, the consumption gap among rural residents tends to widen and the problem that consumption rate of China's rural residents is strikingly low is not effectively addressed. After the 2008 global financial crisis, the macro economic situation in China and other countries has changed. As a result, it is more urgent to change the unbalanced proportions of consumption, investment and net export in national economy, while to spur the consumption demand of rural residents who account for 54.32% of the Chinese population remains the focus of efforts to expand the domestic demand.2. Income is the core variable affecting the rural household consumption; social security, fiscal and monetary policies are also effective tools influencing rural household consumption(1) Income is the core variable affecting the rural household consumption. A long-term and steady equilibrium relationship and short-term dynamic adjustment mechanism stand between the per capita consumption expenditure and per capita net income of China's rural households before and after 1996. Income is the main factor influencing the consumption of rural households. With the coming of mid 1990s, economic restructuring increased the uncertainty of rural household consumption. For instance, rising medical costs, the absence of medical insurance system in rural areas, the pressure of higher tuitions for higher education made MPC decline continuously. Short-term dynamic adjustment enabled the rural households to derail from the original equilibrium relationship between the expenditure and the income, and a new equilibrium relationship was thus formed.In terms of income category, the increase in permanent income, temporary income will pick up consumption of rural households. Permanent income exerts a far greater influence on consumption of rural households than the temporary income. The increase in salary income, operational income, property income, transfer income of rural residents will give catalyst to household consumption; comparatively, operational income exerts a greater influence on household consumption than the other three incomes.(2) A sound social security is supposed to greatly reduce the future healthcare and medical expenditure for rural residents; thus increasing the anticipated consumption of consumers and promoting the consumption of rural households. However, as the social security coverage in our country is relatively narrow, social securities only play a limited role in spurring the consumption of rural households.(3) China's policy of financial support for agriculture shows strong output tendency in the course of implementation. The agricultural fiscal expenditure of China significantly boosts the gross output in the rural areas; however its influence on rural household consumption is comparatively weak. In terms of subdivided category, different kinds of agricultural fiscal expenditures exert different influences on the consumption of rural households. Funds for public utilities, poverty relief and technology have positive effects in stimulating the consumption of rural households; whereas the expenditure on agricultural capital construction generates a negative effect on the consumption of rural households. (4) Expansionary monetary policy is negatively related with rural household consumption. More money supply results in immediate increase of the consumption. The rising of interest rate will produce a negative, though weak effect on the rural household consumption by reducing the immediate consumption.3. Stimulating rural household consumption in China requires policy support as well as an enduring effective systemRural household consumption is influenced by various factors. Therefore, releasing the potential of rural household consumption requires policy support. It is difficult to basically address insufficient rural household consumption in China singly by short-term policy adjustment to result in income increase of rural residents. It is also required to establish a long-term effective system for income increase of rural residents; set up various guarantee systems for rural residents and areas; pump more investment in the infrastructure of rural areas; improve consumption credit market in rural areas. All these are intended to make rural residents get richer, to encourage them to consume and help them know where to use their money.Firstly, it is required to promote constant and stable income increase of rural residents and stabilize income expectation. It is required to break the bottleneck for the increase of operational income of rural households, reduce the natural and market risks of agricultural production, and increase permanent income of rural residents. It is required to improve the literacy and capabilities of rural residents, stabilize their salary income, and increase the percentage of property income and transfer income of rural residents. Besides, it is also required to establish a stable and harmonious social system.Secondly, it is required to strengthen the financial support to agriculture, optimize the structure of financial support to agriculture, and improve the environment for household consumption. It is also needed to gradually improve the credit market for household consumption in rural areas, and eliminate the liquidity constraints for the rural residents. â…¢. Characteristics and New Methods(1) Under many research angles of views, this paper innovatively constructs a more general theoretic framework of rural household consumption in China, and search the main factors affect rural household consumption, provide analysis premise for hypothesis condition of empirical study, and this is an attempting development to existing theoretic study of household consumption.(2) This paper innovatively construct econometric model of China's rural household consumption fluctuation with dynamic GMM method,Co-integration and VAR etc. time series modeling technique, empirically studies the influence of various macroeconomic variables such as income, social security, financial expenditures for agriculture and monetary policy etc. on rural household consumption, and this is an innovative explore to existing empirical study.(3) This paper brings forward the policy advice that can effectively stimulate rural household consumption in china. it is required to stabilize income and expenditure expectation. and improve the environment for household consumption. It is also needed to gradually improve the credit market for household consumption in rural areas, and eliminate the liquidity constraints for the rural residents.