A Study On The Relationship Between The Development Of Urbanization And The Consumption Of Urban And Rural Residents In China

With the Economic development, the imbalance between the domestic and external demand has been an outstanding problem. Because of the financial crisis in2008, our economic faced a sharp decline in external demand. However, for a big country which has almost14billion people, we cannot rely on the foreign country to solve our demand problem. Expand the domestic demand should be a long-term national policy. While there is a problem, how can we find some effective measures to stimulate the consumption and promote the economic growth, as an economic development booster, urbanization has attracted more and more attention from the government and the theorists. The relationship between the urbanization and the consumption has also been a hot topic. Relying on many years’ data about the urbanization and the consumption growth, this paper presents our country’s urbanization development and the household consumption growth in detail and attempts to analyze the reason about the decline in our consumption rate viewed from the consumption structure point. Since the21st century, the rapid urbanization development brings some related economic effects. This paper attempts to analyze the relationship between urbanization development and the household consumption in depth, and explore the new paths to improve the household consumption.On the basis of the existing literature research results, this paper firstly analyzes the relationship between China’s urbanization and consumption. On the one hand, income effect brought from urbanization can boost the household consumption growth. Besides, the "demonstration effect" brought from the urbanization can help rural people change the consumption style and behave like the urban people. And urbanization development can also enhance consumer confidence. On the other hand, more and more people are attracted by the perfect urban infrastructure, the comfort of the living condition and the convenience of consumption in city. They tend to live in urban area as long as they have the consumption power. However, the higher cost of living in the urban area also made rural people afraid to choose to live in city. Afterwards, this paper gives a clear status of China’s urbanization and the household consumption. China is currently still in the accelerated phase of the urbanization and there is still much room for development, as there is still a distance between China and foreign developed countries. Talking about the household consumption, the consumption rate is still low and the household expense proportion on living, walking and learning rise slowly, especially in the rural area. Insufficient consumption investment is an important reason.Next, this paper establishes the VAR model basing on the theory research in order to give a detailed relationship between urbanization and the household consumption. The result shows that the urbanization development has a positive effect towards the household consumption. After comparison, we find that there is significantly positive relationship between the urbanization development and the household consumption. At last, on the basis of the previous studies, this paper provides some policy recommendations.