An Empirical Research On The Impact Of China’s Urbanization On Domestic Demands

The economic growth rate of China was only7.4%in2014, which created thelowest value in the nearest24years. Keeping a7%economic growth rate will becomethe "new normal" of China. According to the data released by the China’s statisticsbureau, China’s economic growth rate has been declining since the2008financialcrisis. The dropping of China’s growth is directly related with the weak consumptionof the United States, the European Union and other countries or economies after theeconomic crisis, which deal to unsustainable of the China’s exports. China’s economyis facing the transformation that change from the Export-oriented economy to adomestic demand growth economy. In order to keep the robust growth of China’seconomy continually, we have to look for another power.In2012, Li proposed that "the urbanization is the greatest potential to expanddomestic demand". With the help of urbanization, to accelerate the transformation ofdomestic demand growth of China’s economy is the optimal choice of economicdevelopment at present. According to the latest data published by the national bureauof statistics on January20, in2015, China’s urbanization rate which calculated on thepopulation of permanent residents reached54.77%in2014. But if calculated on theregistered population urbanization, the rate was still less than40%. The urbanizationrate of the United States and other developed countries is as high as80%or even90%.Contrasting with it, the urbanization level of China can still rise greatly. And in theaspect of the quality of the urbanization, there are still some deficiencies obviously inour country. If we want to expand the domestic demand and promote economicdevelopment, we must improve the quantity and quality of urbanization of ourcountry in the same time.In this paper, I sort out the mechanism of action of urbanization to promotedomestic demand growth from three perspectives, which are consumption, investmentand three industrial structures. Then, select the urbanization, consumption, investmentand other relevant data of China from1978to2013, with which I build a timesequence. On the basis, using the econometric model, I do an empirical research for the effect that urbanization influents the level of consumption and investment.The Analysis of the result of the empirical research says that the urbanization inour country over the past30years can promote consumption and investmentgrowth on the whole. However, the effect began to emerge from the second year afterthe agricultural population change to non-agricultural population. The promotingeffect of urbanization on consumption mainly displays in the influence of T-1phaseof urbanization on the T phase consumption. When the urbanization level in t-1phasegrows1%, the consumption will have a growth of0.19%, the investment will have agrowth of1.92%. But in year of urbanization, it has a certain degree of inhibitoryeffect on the rate of consumption and investment growth.The reason why China’s current urbanization do not do positive to the domesticdemand, is that under the government’s municipal planning the passive urbanization isof low quality. The key to expanding domestic demand of urbanization is to improvethe quality of urbanization. Therefore we should improve urbanization to boostdomestic demand from two aspects, which is improving the quality of urbanizationconstruction and strengthening mechanism of urbanization impact on domesticdemand. In terms of urbanization, urbanization of farmers should be taken as the keyof the development of the urbanization. At the same time should promote the DPPcountries back in urbanization construction and make enterprises gradually becomethe main driving force of the development of the urbanization. In addition, the situurbanization should be the main path of development. In terms of strengthening theeffect of the urbanization on domestic demand，should do something from the microlevel. We should optimize the structure of industry of our country from the way suchas developing new agricultural and accelerating the construction of agricultural orindustrial park, which will promote investment growth, improve the employmentdemand, and increase the income of residents at the same time. With the measure suchas implement mobile vendor legalization mutual coordination, they can increaseresidents’ consumption ability. By changing the form of agricultural subsidies,cultivating residents’ consumption habits with the consumer credit, it can improve thelevel of consumption.