The Influence Of China’s Fiscal Expenditure For Assiting Agriculture On Rural Residents’ Consumption

Investment, exports, consumption are three carriage of economic growth. With the deepening of the global financial crisis and the European debt crisis, The risk and uncertainty which China’s exports faces with is increasing; on the other hand, the local government debt is increasing at present. Moreover the unsustainability and the limitations of government investment are also increasingly exposed. All these situations require Chinese economic growth switch from major dependent of capital investment and internal consumption to potential of internal consumption. Stimulate domestic consumption especially the rural consumer demand which accounting for the majority of the population and lack of consumption through the introduction of a proactive fiscal policy to pull the growth of total demand. However, there are crowding-in effect which stimulate consumption and crowding-out effect which inhibit consumption between fiscal spending and consumer spending which depend on the specific circumstances of the actual situation in different countries. Therefore, the design of fiscal policy must be based on a detailed analysis of the impact of government cost on consumption.Firstly, the study is based on the theory and analysis of government expenditure and resident consumption. By establishing theoretical model and analyzing mechanism of action that fiscal policy affects consumption with combination policy of rural fiscal transfer payment and the actual consumption of rural residents to analyses the effect of government expenditure on the consumption of rural residents specifically, and to make sure of the influence path. Secondly, it analyses current situation and development trend of government financial expenditure and the consumption of rural resident from the aspects of quantity, the proportion and structure based on the time series data of our government expenditure and rural residents’ consumption. Thirdly, it examines the relationship between rural financial expenditure and rural residents based on the stationary test of time series data to verify the Granger causality and the cointegration relationship between them. And clear the long term effect between both above through the impulse response analysis. Furthermore, it verifies the relationship between rural financial expenditure and the consumption of rural residents consumption by distinguishing different classes of the structure of fiscal agricultural expenditure, and find that three expenditure of the rural science and technology has weakest impact on the consumption of rural residents, followed by the basic construction expenditure, rural relief expenses, expenditure for supporting rural production and the expenditure. Finally, it designs the policy from the aspect of the expansion level of fiscal expenditure, optimizing the fiscal expenditure structure, improving the income level of farmers and improving rural consumption environment based on the main conclusions of this study to provide the basis for the formulation of government fiscal policy and rural consumption policy.