Liquidity Constraints And Urban Residents In China Consumer Behavior

From 1990, it is an undoubted fact that the consumption tendency of the residents is declining and the saving rate is continuously increasing. During the period from 1978 to 2004, the increase of residents' saving of each year keeps on enlarging. Previous studies showed that liquidity constraints may increase saving and decrease current consumption.We can estimate the degree of liquidity constraints of the economy by measuring the proportion of the residents who are affected by liquidity constraints. In this study, by regressing the panel data composed of consumption and personal income from provinces of China, we find out that the liquidity constraints the Chinese city residents face is tight. The uncertainty of transition period and the faultiness of monetary market prick up the constraints. Improvements of consuming environment will help to relax the constraints. In order to stimulate gross consumption, we have to abate uncertainty of the transition, improve credit market and do effort to speed up the income growth of the constrained residents. The government must expedite the foundation of social security system, which will stabilize the residents' expectation of the future. The development of consumer credit will improve the environment of credit market. Additionally, it is important to make changes of the old consuming habit.The data of consumption in the regression is supposed to be the consumption of non-durable goods, which is hard to get All previous studies of Chinese scholars use the personal consumption including both the durable and the non-durable goods. For the sake of the veracity of the result, I deduct the items that have the property of durable goods from personal consumption. Then use this new data for regression. This is interiorly the first time among similar studies.