The Nonlinear Effects Of Rural Residents' Consumption On Economic Growth In China

Consumption, investment and export are often referred as "Troika" in promoting economic growth. Among them, the consumption plays a fundamental role in stimulating economic growth. At present, China's economic development has entered a "new normal", investment is slowing, exports is sluggish, Thus, taking the right consumption policies to boost consumption is the important guarantee for smooth transition of the national economy structure and maintenance of the rapid development of our economy. But for a long time, the main force of China's consumption growth lies in urban area, rural residents'consumption has lagged far behind, it affects China's overall consumption growth. While China has 618 million rural residents,45.23% of the total population, indicating that the rural consumer market is a consumer market which is full of unlimited potential. However, Inflation has a great influence on consumption of rural residents.Therefore, while the urban residents'consumption market is relatively saturated, the role of rural consumption development will be increasingly important, and how to reduce the impact of inflation on consumption of rural residents and how to start and promote the consumption of rural residents will be the key to stimulating economic growth.Based on the above background, first this paper explains the impact of inflation on the consumption and the mechanism of how consumption have an effect on economic growth. Then, this paper uses statistical data to analyze the status of rural residents'consumption and compares it with urban residents'consumption, then generalizes the general characteristics of consumption of rural residents. At the same time, this paper compares stimulating effect of consumption of rural residents and urban residents on economic growth in terms of investment, consumption and net exports respectively, and concludes that the effects of consumption on economic growth remain to be enhanced, especially in the rural area. Then, the empirical analysis selects 1994--2014 panel data from 30 provinces, uses the panel data smooth transition regression model to investigate the nonlinear relationship of consumption and economic growth among rural residents, and draws the following conclusions:(1) There is a non-linear relationship between rural consumption and economic growth, with the rising inflation, the impact of rural consumption on economic growth is gradually reduced, indicating that high inflation is not conducive to the promotion of economic growth, inflation should be controlled within 3.13%; (2) At present, contribution of rural consumption to economic growth is small, and to a large extent, is influenced by inflation. Finally, based on theoretical and empirical analysis, this paper makes recommendations on how to develop rural consumption, and how to control inflation effectively.