Research On Interrelationship Between Consumer Credit And Economic Growth Of Guangdong Province

In1950s, western countries began to utilize financial policy to regulate consumption.Before that, fiscal and income distribution policy were frequently employed. In theearly1990s, as some western countries slipped in recession, governments hencepromoted consumer credit in order to stimulate effective demand. Since then,consumer credit has been developing rapidly. In March1999, People’s Bank of Chinaissued The Guidance of Developing Individual Consumer Credit, followed by anationwide popularization of consumer credit business. After more than a dozen years’development, China’s consumer credit balance has gained an increase from45.62billion yuan in1998to8.88trillion in2011. Meanwhile, Guangdong Province hasobtained prominent growth to1.24trillion yuan in2011, which occupied nearly14％of the whole country. Nowadays, consumer credit has already been one of the mostpotential value added business of commercial banks. In that way, this essay conductsa research on whether consumer credit can push forward Guangdong’s economics,how much the impact is, and what the interrelationship between the two factors is.A combination of theoretical and empirical research method is used in this essay.Basic theories including economic growth, consumption, credit and demand areintroduced at first. Then we select the seasonal data of GDP, consumer credit balanceand consumer demand of Guangdong Province from2004to2011to structure a VARmodel, followed by Johansen co-integration test, impulse test, variance decompositionand Granger causality test which illustrate consumer credit’s impact on economicgrowth and their interrelationship. In the end, we conduct an economic analysis onrelevant problems in the model. According to the conclusion, there is a long-termstable interrelationship among GDP, consumer credit and consumer demand. However,the pull effects of consumer credit on GDP tend to be not so obvious in Guangdong.Three main economic reasons are concerned. Firstly, economy of Guangdong is stilldominated by investment and export. Secondly, resident income falls behind thegrowth of economics. Thirdly, income gaps in the fields of individuals, urban andrural, enterprises, regions and industries are relatively large. These problems lead toconsumption’s failure to keep up with economic development.To sum up, consumer credit is a multidimensional economic phenomenon, which calls for further research in more deep level. This study involves a superficial trial only, butthe author still hopes that it can be used for reference in the study concerning thistopic.