Does Fiscal And Financial Policy Promote Country And Rural Residents’ Consumption Effectively?

Due to long-term investment-led economy, China’s investment rate has exceeded the optimal values of society. Internal and external factors make China’s economy has entered a "new normal". Under this "new normal", how to expand domestic demand, especially the household consumption, has become a breakthrough point of China’s sustainable economic growth. Fiscal and financial policy as an important means of macroeconomic control is an indispensable policy tool to stimulate domestic demand. In recent years, China’s fiscal and financial investment scale expands unceasingly. From 2000 to 2014, the financial investment has grown 10 times and the credit scale in financial institutions seven times. But the household consumption ratio decreased from 74.5% to 72.6%, far behind the developed countries, and even the level in developing countries, which undoubtedly hindered the sustainable growth of China’s economy. From China’s current consumer market, with the continuous development of urbanization, the county residents show strong consumption ability and consumption demand, and this with rising state; while the rural consumption which has a huge consumption potential is still in the doldrums. Therefore, how to effectively promote the country residents’ consumption, start the county rural residents’ consumption, is the key to boost domestic demand and realize the economic restructuring. Based on the realistic background, this paper takes the county residents’ consumption and the rural residents’ consumption as the research object, studying the effects of fiscal and financial policy on promoting household consumption. With theoretical analysis as starting point, the research ideas combine the empirical analysis and policy analysis. As follows: on the basis of relevant theories, analyzing the influence mechanism, constructing a dynamic model of household consumption by using mathematical economics method, then respectively using Quantile Regression method of cross- section data and panel data analysis to makes an empirical analysis for county residents’ consumption and rural residents’ consumption. And put forward the corresponding policy recommendations based on the research conclusion.The study in this paper shows that fiscal and financial policy has an important impact both on county and rural residents’ consumption. But there are significant hierarchical differences as well as temporal differences, mainly including the following respects:(1) Overall, fiscal and financial policy has not effectively promoted county residents’ consumption. There is no significant influence of China’s fiscal and financial policy on county residents’ consumption, which indicates there are some deficiencies of current fiscal and financial policy in stimulating the consumption of county residents. Therefore, how to develop a scientific policy according to the characteristics of county residents’ consumption is the focus for fiscal and financial policy in the future.(2) There are obvious hierarchical differences of fiscal and financial policy on county residents’ consumption. From the perspective of hierarchical differences, fiscal policy has a significant positive effect only in the medium high and the highest consumption group, and no significant effect in the rest of the quantiles; while financial policy has not yet been conducive to the promotion of county residents’ consumption, even has an inhibitory effect in the medium high group.(3) Overall, fiscal and financial policy has effectively promoted the rural residents’ consumption, but the effects are different. China’s fiscal and financial policies have a significant positive effect on the consumption of rural residents. But compared these two policies, the promotion of fiscal policy is stronger, which shows that China’s fiscal policy has effectively promoted the rural consumer market since 1997-2012, while the role of financial policy still needs to be further improved.(4) There are obvious periodic differences of fiscal and financial policy on rural residents’ consumption. From the perspective of periodic differences, the promotion of financial policy on the rural consumption market began to emerge since 2004, mainly due to the constant improvement of rural financial system; while the promotion of fiscal policy not only didn’t rise, even declined, but this conclusion does not negate the positive role of fiscal policy on rural consumer market, which just reveals China’s multi-level fiscal funds allocation system caused the decrease of allocation efficiency and unable to effectively promote the economic growth of rural areas.(5) There are obvious regional differences of fiscal and financial policy on rural residents’ consumption. The impact of China’s fiscal and financial policies on rural residents’ consumption has obvious regional differences, which shows that the promotion of fiscal policy on the rural residents’ consumption is remarkable in the eastern region with strong financial strength and the western with the country’s key support, instead no significant role in the central region. In addition, due to the nature of pursuing the interests of finance and backward rural financial system, the impact of financial policy on the rural residents’ consumption in the western region showed an inhibitory effect.Based on the conclusions above, this paper puts forward the following policy recommendations:(1) Improve the residents’ income mechanism of fiscal and financial policy. Firstly, improve fiscal allocation mechanism. The government can improve residents’ employment environment and agricultural infrastructure by using some policies, including government investment, transfer payments, taxation and so on, which would promote residents’ income effectively. Secondly, improve financial input mechanism. The main aspect is to provide essential capital resources for agricultural sector and micro enterprises to increase the residents’ income. Besides, it’s also necessary to improve the capital market, which can play a wealth effect.(2) Establish consumer guide mechanism of fiscal and financial policy. Firstly, establish fiscal guided consumption mechanism. On the one hand, fiscal policy should increase support to the modern service industry, promoting the steady and rapid development of the modern service industry and improving consumption environment. On the other hand, the social security system is also an important way to expand the need of consumption. Secondly, establish finance guided consumption mechanism. Commercial banks can appropriately provide differentiated financial services for different consumer, enriching consumer finance products, so that can provide more convenient for household consumption.(3) Innovating the regional co-ordination mechanism of fiscal and financial policy. Firstly, the innovation of the mechanism of provincial co-ordination. In the aspect of fiscal policy, the government should increase investment in agricultural infrastructure construction in the central and western regions and the intensity of fiscal transfer payment to expand backward area tax breaks and subsidies, etc. In the aspect of financial policy, it should follow the differentiate financial policy, giving more discount interest on loans and money supply on the western rural areas of China and guiding the flow of financial resources. Secondly, the innovation of the mechanism of country co-ordination. In the aspect of fiscal policy, the government should optimize the structure of fiscal expenditure to promote the consumption of low consumption level country. In the aspect of financial policy, The government should improve the level of income of residents, alleviate the liquidity constraints, play a wealth effect and innovative financial products, so that can strengthen the conduction effect of the financial policy to promote residents’ consumption.(4) Strengthen the supervision and examination mechanism of fiscal and financial policy. Firstly, the supervision method of fiscal and financial policy. It’s necessary for government to set up the funds audit system of fiscal and financial policy. Besides, in order to improve the efficiency of the fiscal and financial policy and make the resources in place, the government should control the capital operation strictly. Secondly, the examination mechanism of fiscal and financial policy. The level of residents’ consumption should be set as the important assessment indicator. If it cannot reach the expected effect of policy objectives, then the government should form a feedback mechanism to analyze the reason of it, so that can ensure the efficient of fiscal and financial policy.