The Driving Mechanism Of China’s Urbanization To Rural Economy

China’s economy has been blessed with more than 30 years’prosperity since China’s reform and opening up policy.However, more and more urbanization and three rural issues have come out nowadays.This paper chooses the topic of driving mechanism of China’s urbanization to rural economy, not only focuses on the issues of China’s urbanization,but also researches the three rural issues, combining urbanization research and rural research together,analyzing those problems by economic tools.This paper begins with policies which can influence the production factors between urban and rural areas,then analyzes the changes of the production factors in China’s rural areas during last three decades, gradually getting the conclusion that the development of China’s rural economy is promoted by government’s investment.Thus, here comes the conclusion that the driving mechanism of China’s urbanization to rural economy is-the mechanism of "industry nurturing agriculture" through the transferred payment from the government.This paper analyzes this driving mechanism, founding it has some defects such as slow reform progress of dual-structural household register system, land finance, difficult financing of township enterprises, and the problems of capital market.These defects induce the soaring house price, the high vacancy rate of house in both urban and rural areas, the inadequate supply of indemnificatory housing, the aggravating gap between the rich and the poor.The main reasons of these problems above are government allocated too much resource, as well as the absence of prosperous capital market. Moreover, this paper designs a new development mechanism to solve the current existing urbanization and rural problems-replacing the "middle man" role of the government currently with sound capital market, which transfer the surplus value of the industry and the service industry to rural areas. The operation of the new mechanism will run in the form of "stock price rising and house price dropping", which will solve some current urban and rural problems of China.In addition to the chapter of introduction, this dissertation is divided into three parts:The first part studies the present driving mechanism of urbanization to rural economy in our country. Firstly, through the analysis of China’s urbanization and rural economic development, this part obtains the conclusion that the development of our country’s urbanization has not trigger recession of rural economy. Then the paper analyzes the related policies or situations which can influence rural production factors, including the household registration system, urban and rural land system, the present situation of rural finance development, China’s fiscal agricultural supporting policy.Meanwhile, it makes a qualitative analysis on*the production factors required by long-term development of rural economy. This part gets the conclusion that the main driving force of rural economy is government investment at the background that rural labor forces being employed in urban areas, the arable land reduced, and the private capital flowing into the city. Therefore, it comes to the conclusion that the current mechanism of urbanization promoting rural economy in China is:the process of the fulfillment of the industry nurturing agriculture with the government as the middleman between the city and the countryside.The second part analyzes the defects of the driving mechanism,such as slow reform progress of dual-structural household register system,land finance,difficult financing of township enterprises,and a series of capital market problems.These defects induce soaring housing price, the high vacancy rate of urban and rural houses, the inadequate supply of indemnificatory housing, the aggravating gap between rich and poor. Government’s need of land finance and resident’s investing demand of house, leading to aggregate the soaring house price and house vacancy. It also causes township enterprises financing hard from the capital market. Through the analysis of indemnificatory house market model, getting the conclusion that the construction of indemnificatory house will not lead the housing prices decline, but reducing the financial income of the government, which could increase the land price as well as increase the house price.Finally it points out that the contradictions of China’s urbanization and three rural issues are complexes which are interactive, mutual influencing, and mutual functioning. In a word, it is because the government allocated too much resource, and the current mechanism of China’s urbanization that drives forward the rural economic development, as well as the missing role of the resource allocation in China’s capital market.The third part designs a new mechanism, which can fulfill the urbanization promoting rural economy mechanism by capital market as the middleman instead of the government, at the same time it can promote the solutions of these issues faced by China’s urbanization and rural development. It puts forward that through the improvement of Chinese capital market, the high stock participation rate of all the residents, and the registration system reform, township enterprises’ direct financial proportion will be improved and farmers will be employed locally. The development of township enterprises will promote farmers’turn to citizens near their homes, which will alleviate big city’s crowd and three rural issues. Through encouraging residents in both urban and rural areas to invest stocks, the investment structure of them will be changed, and the housing prices and housing vacancy rate will reduced, and the financing of township listing enterprises can be provided. In order to upgrade the mechanism, as well as the "soft-landing" of the transformation, the government should take a "package" of policy tools, including using loose monetary policy to swallow house prices, the appropriate construction amount of indemnificatory house for the "soft landing" of real estate industry; the reform of the household registration system; the real estate tax to increase the cost of housing speculation.The last part deals with summary and prospect.