The Behavior Of China’s Rural Consumption In The Process Of Urbanization

China have30years of high speed development since1978, while theconsumption demand have been quite poor which becomes the limit of nationaleconomic growth and key for the economic transition. This paper will focus on thethree aspects of the consumption demand.Firtsly, this paper examines the relationship between urbanization and ruralconsumption in China by employing the provincial panel data set from2000to2009.The income effect and demonstration effect raised in the process of urbanization aremeasured through decompositing the income structure and consumption structure. Wefind that urbanization has significant pulling effect, which is especially strong in thepoor west region, on APC in rural China. We also establish the wage income channelas main way for income effect. In addition, it tells that demonstration effect works onnon-rigid consumption, such as transportation and communication expenditure,educational expenditure and clothing expenditure.Secondly, this paper examines the factors relating to rural consumption in Chinaby employing the provincial panel data set from2000to2009and the method of PMG.We find that demonstration effect works by the channels of transportation,communication expenses and medical care expenditures. We also establish theinternal consumption habit as one of the main variables affecting consumption. Inaddition, it tells that except for food expenditure, the consumer spending cannotrefuse life-cycle characteristics.Lastly, this paper examines the factors relating to rural consumption in China byemploying the provincial panel data set from2000to2010and the method of PMGpanel error correction. We find that demonstration effect exits in the urban, rural totalconsumption. specifically, it works by the channels of culture, education,entertainment goods and services expenses, medical care expenditures, householdequipment and services and transportation, communication expenses. What’s more, itdiffers from the long-term and shsort-term effects across different items. We alsoestablish the Income gap between urban and rural areas as one of the main variablesinversely affecting demonstration effect.