Financial Development, Urbanization And The Urban-rural Income Gap In China

Since the reform and opening up, China’s economic development has been constantly improving with China’s economic "growth miracle". Because of the difference of location advantage and policy support, the dual structure in urban and rural economy appears day by day. The dual structure in urban and rural economy which performanced in the national income distribution is the expanded gap of income of urban and rural residents. With the perspective of historical evolution of urban-rural income gap, urban-rural income ratio rose from 1.82 in 1983 to 2.749 in 2014,which has been rising by more than 50%. If the recessive welfare and subsidies are counted as a part of personal income, China may be one of the country which urban-rural income gap is the biggest in the world. "The Latin American pattern" tells us, ignoring the income distribution gap is the deep reason of social unrest, and the simple pursuit of economic growth could also lead us into a "middle-income trap", which is not conducive to the healthy development of the economy. With the disappearing of "demographic dividend" and decreased of labor cost advantage year by year cases, New urbanization has became the new growth point of China’s economy. Based on the comparison perspective of Urbanization and industrialization and in comparison with the same income level countries, the urbanization of our country shows significant hysteresis. The lag of urbanization is an important cause of difficult to reverse the widening income gap between urban and rural residents in china. Finance which gives an important support for the development of urbanization is the core of modern economy. The impact of financial development in the process of urbanization on urban rural income distribution, so as to optimize the distribution of urban and rural income in China, has become an important research topic in the field.Firstly, the background of China’s urbanization, financial development and the urban-rural income gap are analyzed; then based on the theory of home and abroad, this paper summarizes income distribution theory, the mechanism between financial development and the urbanization, and built dual structure in urban and rural economy which contains financial development, urbanization and the urban-rural income gap. Then this pape analyzes the current situation of the urbanization development which influenced of financial development, then analyzes some problems existing in the financial development which promotes the process of urbanization in China:(1) rural urbanization is lack of financial support;(2) the financing of small and medium-sized enterprises is difficult;(3) financial support and Industry development is not coordination. From the perspective of quantitative analysis,this article also analyzed the current situation of China’s urbanization which is absolutely lag, and the interaction between urbanization and the urban-rural income gap is also analyzed. On this basis, an empirical study using panel data model are carried out, and draw the following conclusions: financial development can significantly promote the development of China’s urbanization, and urbanization is an important way to suppress the income gap between urban and rural residents to expand further. Urbanization plays an intermediary role of the mechanism which financial development influence the income gap between urban and rural residents in China. Finally, this paper which combines the background, current situation and the empirical results put forward some suggestions on narrowing the income gap between urban and rural residents in China.