Analysis Of The Impact Of Social Security System On The Consumer Demand Of Urban Residents In China

The present paper mainly discussed the impact of the social security system on the consumer demand of urban residents in China. Since the reform and opening up policy, China’s real economy gained rapid development under the socialist market economic system. However, with the development of China’s market economy becoming mature, the drawbacks of China’s investment and export-focused model of economic development has become more apparent. For a long time being, the government-led investment regime and export-oriented foreign trade development mode has obviously stimulated the rapid economic growth, which in turn led to the GDP growth largely depend on the scale of domestic fixed asset investment and the growth of foreign trade volume. While the effect of consumption, especially residents consumption, in stimulating economic development is not obvious.Social Security is a tool that government uses to regulate and control the macroeconomic, its "regulator" role as maintaining social stability also gain currency in the practice. In western countries, expanding the scale of fiscal expenditure of social security is an important way to stimulate consumer demand; they also promote economic development by regulating the social demand and consumption structures as well. This paper focuses on the impact of social security system on the consumer demand of urban and residents in China, discusses the relationships between the two aspects through a combination of the theoretical and empirical approaches.The researcher compared and analyzed the time sequential data of social security in China from1981to2009and found that, in the short term, as the social security expenditure increases one present, the resident consumption will decreases0.02present respectively. The increasing of social security expenditure has a positive impact on resident consumption from the long term co-integration coefficient between variables; the impact of social security on resident consumption is not evident if the co-integration coefficient is0.085, while the potential to promote resident consumption can still be tapped.The researcher concludes that the impact of social security system on resident consumption is shifting from negative role to positive, and is enforced gradually as well when combining the long-term and short-term impact factor. The finding indicates that, one hand, the current direct of social security system reform in China is correct; on the other hand, there are plenty of drawbacks of the current policy, more deepen reform is required to better the social security system.The researcher also analyzed the provincial panel data from all over the country between1999and2009and found that; the impact of social security system on consumption in most areas is not significant, which means that no causal relationship between social security expenditure and household consumption expenditure exists. The possible reasons for this result may related to the level of economic development, the regional labor force structure, and the level of overall planning of the social security system in different areas.Finally, the researcher proposed policy recommendations’towards how to improve the current social security system, and promote the consumption demand of urban residents, based on the empirical analysis and the existing issues of the social security system in China.