Research On How Financial Constraints In China’s Bank Credit Market Restrict Consumer Consumption

Consumption has been not only one of the most significant factors in promotingthe sustainable economic development, but also the main driving force for the socialand economic advancement. However, during the past three decades, the proportion offinal consumption in GDP has declined from62%to49%, and Consumer ConsumptionRate has also fallen to36%from53%, reaching its lowest level in history. Therefore,how to enlarge the domestic demand has now become a hot topic, and it is of greatsignificance in propelling the society and economy forward. This thesis focuses on thecontradiction between the financial constraints of China’s bank credit market andconsumer demand. Firstly, the author introduces the theory of financial constraint andthe mechanism of how financial constraints curb consumption, and summarize themethod the scholars at home and abroad used in constructing the Financial ConstraintIndex, which lays a theoretical foundation for the empirical test. Then this thesispresents a detailed analysis of China’s financial constraint policy, which includes thecontrol of the deposit and lending rates, the restrictions in the financial industry accessand the limit of asset substitution. The author also establishes the Error CorrectionModel, investigating the long-term impact that the financial constraints in the bankcredit market posed on the Consumer Consumption Rate. Finally, the author proposesthree countermeasures and suggestions, mainly including:1.Further promoting themarketization of interest rates;2.Liberalizing the financial industry access;3.Diversifying the people’s financial asset investment.