Chinese Residents' Consumption Analysis And Macro Policy Research During The Period Of Transition

In the process of globalization, structural Disequilibrium of world economy is the key reason for financial crisis spread. The developed economies in which the United States is as the representative are over-borrowing and over consumption; On the contrary, the emerging economies in which China is as the representative, is forming into an export-led economic growth mode. Its economy growth is increasingly relying on the needs of export and the large foreign exchange reserves accumulated by export has been lent to the United States with very low interests rates to maintain its long-term debt consumption. As the outbreak of financial crisis, the old economic balance has been broken and the new balance will depend on the’De-leveraging’carried on by developed economies which means to enhance saving rates and reduce liabilities and the internal structure improvement implemented by emerging economies, in which means enhancing domestic demand to digest excess capacity in order to reduce the depends on export.What is the next drive for Chinese economy growth? Obviously, export will not be the mainspring, especially when the economy of developed countries stays on the edge of recession. The focus of our policy should be on expanding domestic demands. Unfortunately, as the third biggest economic entity global wise, private consumption in China is unhealthily low, at only40%of GDP. In the meanwhile the other big economic entities are at60%or even more. Consumption relies on income, wealth and culture which should be further reformed.The main reason for China’s economic structure imbalance is the tendency of high savings and the declining on the proportion residence’s income to GDP. The key reason leads to high savings is the government’s motive to pursue profits which cause the execution dreadful on public financial functions and rising on public savings. In the long term, it will lead to stagnation. The future of national is in the fact that does not dispute. Since1999, the percentage of citizen’s income versus overall GDP is statistically declining. State-owned or state-controlled enterprise is playing a more and more important role in economy. In this time’s financial crisis, local government went support from all sorts of financial platforms for project finance. State-owned economy overplayed its role in China’s economy which will make the economy lose energy, even to stagnation in the end. To change this situation, it is a must to change the way of economic growth and increase consumption.China’s economic transition is inseparable with consumption issue. In a sense, to solve consumption problem is the same issue for China’s economic transition and the methods for China’s economic transition will definitely enhance the demand of consumption. As a result of above considerations, this article will focus on the research of citizen’s consumption issue during China’s economic transition in order to achieves a strategic and systemic research on China’s economic structure adjustment and transition theoretically and operationally. It should focus on five issues:1, the current status and problems on Chinese citizen’s consumption;2, exploring from demand angle on deep-seated reasons and solutions of consumption restrict;3, the existing problem and conflict on the supply side;4, the role financial system played as to weaken the budget constraints and smooth the consumption;5, the role financial policy played as in strategic level and the policy level to boost consumption.Western economics classic consumption theory has general discusses on the decision or influence factors of consumption. It says that sight income, permanent income and lifecycle play very important role on expense. Based on this theory, considering the special situation in China, this article states the point that citizen’s income is the key factor to demand of expense and forms the basis of resident’s consumption demand. This article is trying to discuss the deeper reason on the issue of low income for Chinese residence and income gap from the distribution of the national income (income distribution), general income (income flow) and household wealth (income stock). Theory and empirical analysis shows the conclusion that he distribution of the national income in favor to govemment and enterprise department leads to low distribution to residence. The fast growth on savings from government and enterprise is the main reason for the current situation of high savings and low consumption’. In additional, the urban and rural differences on savings rate among citizens, regional differences and the differences on income level caused the consumption of the structural deficiency. The empirical research shows that to regulate the distribution gap plays a very positive role on reducing savings and expanding domestic demand. For income stream, this article states the point to separate residence’s income to salary income, operational income, property income and transfer income. According to the study, the growth of salary income is very slow, behind the growth of GDP and labor productivity. Under Lewis Turning Point, salary income has the growth momentum, therefore under the circumstance of lacking income mechanism from Union to ensure the rational growth on salary income is very important; Operational income grows very fast, but the percentage is still low."The state advances, the private sector retreats" severely prevents the healthy development of individual and private economy. Creating the proper system environment to meet its development demand is the key. Residence’s property income mainly reveals the issue of benefits and risks. Except for the benefits of real estate, benefits from stock, bond and savings are all unsatisfactory. Empirical research shows that resident’s portfolio prefers to low risk of fixed income varieties. Transfer income is the problem of harmful and unbalanced growth. As for the inccme reserve, we believe that Chinese family’s asset scale is low and the root of this problem is the state ownership economy mode prior to the common development of market economy. Along with the low distribution of assets to the residence, the major achievements of economic development was achieved and developed by the form of state-owned property and the state-owned property never distribute to the residence by any means which definitely harm the resident’s accumulating assets. From the aspects of urban and rural residents, this article states that the urban residents have the possibility to share the added values of state-owned property and experience the circulation system reform on the contracted management of rural land.Research on consumer supply is accord with the current situation in China. Parallel international phases, China is on the stage of middle income, but resident consumption is pretty low. History, system and stagnation of market economy development caused the current situation of short supply in the big phase. It proves that consumer supply structural deficiency in China is a big problem. Excess supply of low end expended and lack of middle and high end expended are the main reasonsRestriction on consumers is another important qualification except for the restriction on supply and demand and its flexibility will effect the final consumption. This article starts with the study of mathematical, creates model to test and verify the role consumer credit played on enhancing flexibility of budget constraint, and explains how interest rate, discount rate, wealth and consumer’s marginal utility flexibility influence the consumer behavior. It further proves that consumer credit plays very important role to economy growth and smooth consumption. It helps us to review the previous failures and learn from international experiences on consumer credit; consider the current consumer credit situation and analysis the main issue to reach to the conclusion and throw out relative suggestions.Based on systematic study, this thesis draws out the outline of supporting policies on finance to solve the problem of resident’s consumption issue. From the angel of financial policy, to put forward the idea on deepening financial innovation and develop financial products and consumer credit; from the angel of fiscal policy, to use of financial function to improve income distribution situation and reduce income gap, use a combination of tax policy adjustment and guidance and propose generalized financial suggestions.