Liu Chang, Wang Bo, and Jiao Fang-yi

1 College of Humanities and Law, Northeast Agricultural University, Harbin 150030, China 2 College of Economics and Management, Heilongjiang University, Harbin 150030, China

Consumption Status of China Rural Residents

Since the reform and opening up, the income and consumption level of China rural residents have greatly improved. The per capita net income of rural households increased from ¥133.6 in 1978,the beginning of the reform and opening up, to¥4 761 in 2010. At the same time, the per capita living expenditure of rural residents rose from ¥584.63 in 1990 to ¥3 660.68 in 2010. Besides, the Engel's coefficient of rural residents dropped from 58.8% in 1992 to 43.7% in 2010. With the constant advance of reform and opening up, China national economy has witnessed considerable development, which has pulled the development of rural economy, constantly elevated residents' income and consumption level and enhanced social total consumption ability. However,insufficient consumption, particularly insufficient consumption of rural residents, has restricted further development of China economy to a large extent.

Low total consumption demand of China rural residents

In 1992, per capita net income of Chinese farmers was ¥686.3, and in 2010, it increased by 6.94 times,¥4 761, reaching a record high, but compared with urban area, the total income level of Chinese farmers was still very low. The growth rate of Chinese farmers' income had always fall behind that of urban residents and GDP, which accounted for the low total consumption level of China rural residents.According to the latest statistics, China total retail sales of consumer goods in 2011 was ¥12.5343 trillion(Liu, 2010), up 15.5% compared with 2010. The total retail sales of consumer goods in urban areas reached ¥8.5133 billion, occupying 67.9% of the total retail sales of consumer goods and the retail sales of consumer goods at and below county level reached¥4.021 trillion, merely occupying 32.1%, of the total retail sales of consumer goods, less than half of the total retail sales of consumer goods in urban areas.The total retail sales of consumer goods in rural areas with 2/3 of China population only took up less than 1/3 of the total retail sales of consumer goods, fully demonstrating the low consumption level of China rural residents.

Constantly decreasing consumption rate of China rural residents

The consumption rate of Chinese residents is low,particularly in rural areas. In 1979, the consumption rate of China rural residents was 30.31%, which dropped to 9.08% in 2008, a decrease of up to 21.23%. The low consumption rate of China rural residents is not only related to the income level of China rural residents but also has a lot to do with quite different consumption structures of urban and rural residents in China. In China rural areas, selfsuf ficient natural economy has existed for a long time,market economy is not developed and farmers can satisfy their demands for daily necessities on their own to a large extent. Therefore, in this situation, the consumption demand of China rural residents seems lower. Besides, compared with the consumption rate of China urban residents, the consumption rate of China rural residents is on the low side. In 2010, the consumption rate of China urban residents was 26.4%,while the consumption rate of China rural residents was merely 9.08%, about 1/3 of the consumption rate of China urban residents. This gap is very dangerous.The consumption rate of China rural residents is too low, showing a constantly decreasing trend, in which case, it will be very hard to pull the consumption of rural residents.

Irrational consumption structure of China rural residents

From the perspective of consumption structure, the structure of each consumption expenditure of China rural residents is irrational, compared with that of urban residents. In 2010, Engel's coefficient of China urban residents was 37.9%, reaching a welloff level, while the Engel's coefficient of China rural residents remained as high as 43.7%, maintaining at the subsistence level. The consumption demand of rural residents is still dominated by meeting their basic living needs, leading to extremely insufficient consumption of durable goods. In 2010, the per capita clothing consumption expenditure of rural residents was ¥212, which is less than 1/5 that of urban residents. In 2010, the per capita food consumption expenditure of China rural residents accounted for 43.7% of total household consumption expenditure,but only 37.9% as for urban households during the same period. At the same time, rural residents had insufficient consumption of durable goods. As for the number of durable consumer goods owned by rural residents, except for motorcycles, the average number of motorcycles owned per 100 rural households was larger compared with urban households, the number of other durable consumer goods owned by rural residents was far less than that owned by urban residents.

Factors Restricting Expansion of Consumption Demand of China Rural Residents

Empirical analysis of low income level of rural residents being a key factor restricting consumption demand in rural areas

The sample used in the regression analysis is the annual data from 1992 to 2010 (The China National Bureau of Statistics, 2011). Per capita net income of rural households and per capita living expenditures of rural households were selected as economic growth indicators, represented byXandY, respectively.

Based on the sample observation data, the sample regression equation was as below:

The following results were obtained based on the data in Table 1 using Eviews software fitness regression (Table 2).

Table 1 Household per capita net income of rural residents and rural residents' per capita household living consumption expenditure status (1992-2010)

Table 2 Analysis of household per capita net income of rural residents and rural households per capita living expenditure(1992-2010)

It can be seen that the regression equation was:

As can be seen from the model above,R2was 0.993581, showing a high fitness degree of the equation, indicating that income is the most important factor influencing farmers' consumption. Thus, the most fundamental policy for promoting the consumption demand of rural residents is to actively elevate the income level of rural residents.

Imperfect social security system hindering consumption demand of rural residents

China social security system has centered upon urban residents for a long time. Since the reform and opening up, the income level of urban residents has been elevated rapidly and the social security system has been improved gradually. Urban residents can feel the safety brought by the social security to a certain degree and show higher marginal propensity of consume. However, rural residents lack social security, especially basic old-age insurance, with family security playing a dominant role, lacking recognition of the social security mode for old-age life, which has restricted the consumption demand of rural residents (Liu, 2010).

Inadequate rural infrastructure affecting consumption of rural residents

China dual economic structure has contributed to rural infrastructure seriously lagging behind urban infrastructure, manifested in many aspects, such as roads, transports, posts and telecommunications,electric supply, water supply, commercial network facilities, cultural and sports facilities. The backward infrastructure has not only seriously affected farmers'income, but also affected the growth of consumption demand of rural residents, more seriously restricting the upgrade of the consumption structure of rural households. Currently, there still exist many problems with domestic water, electricities, roads and communication facilities in rural areas (Wuet al., 2010).

First, lagging rural running water construction has restricted the consumption of farmers. So far, there are still a lot of people having difficulties in getting running water in China. In some areas, people still drink well water or surface water, and what's worse, in some areas in Western China, both people and animals have difficulties in getting enough water to drink, not to mention the water used for washing machines and dishwashers. In some areas, in spite of the availability of running water, due to damaged pipes, insufficient maintenance and repair and lack of funds for update,normal water supply can not be guaranteed. Backward domestic water facilities have made such home appliances, such as washing machines, water heaters unable to popularize in rural areas. Besides, the water rate in rural areas is much higher than that in urban areas, leading to sluggish sales of durable consumer goods in rural areas and the phenomenon that "people can afford to buy them, but cannot afford to use them". In addition,the backward domestic water construction in rural areas has restricted the improvement on rural sanitary conditions, rural kitchen revolution, toilet revolution and construction intended to improve the living quality.

Second, imperfect electric power infrastructure has directly affected farmers' productive and living consumption, causing rural consumption barrier. There exist numerous problems with electric power in rural areas in China, such as old and aging grid, unstable voltage, unreliable power supply and high electricity fee. Insufficient power supply or high electricity fee in rural areas has greatly restricted rural consumption demand for such electrical products or products involving the use of electricity. Smooth consumption of such electrical products as TVs, refrigerators and washing machines requires a good supporting electricity consumption environment. During the current process of "home appliances going to the countryside", whether home appliances can really"going to the countryside" largely depends on the perfection degree of electric power infrastructure.

Third, inconvenient traffic and poor roads have restricted farmers' consumption. Lagging rural road construction has restricted the construction of rural logistics systems. On the one hand, farmers have difficulties in getting their agricultural and subsidiary products into town and on the other hand, urban industrial consumer goods have difficulties in going to the countryside, which has directly affected the increase of farmers' income and restricted the growth of rural consumption demand (Zheng, 2008).The current project of "automobiles going to the countryside" is not only a must for realizing the goal of strengthening and benefiting farmers, but also an important measure for pulling production by promoting consumption. A major premise of expanding the rural automobile consumption market is that there must be an extensive road network in rural areas, so that automobiles can run on more rural roads.

Fourth, non-standard rural consumption market has also restricted consumption demand of China rural residents to a large extent. On the dazzling consumer goods market, there are few high-quality low-cost goods that are really suitable for farmers' consumption.Many businesses consider the countryside as a secondary market where they promote urban overstocked commodities, causing some fakes and shoddy commodities to enter the rural market, which has seriously affected farmers' enthusiasm on consumption.

Measures for Expanding Consumption Demands of Rural Residents

To vigorously develop rural economy, actively promote farmers' income increase

Increasing farmers' income is a fundamental way to stimulate consumption of rural residents and expand rural consumption demand. First, the government should continue to stick to various preferential policies for agriculture, increase the efforts to support agriculture, particularly financial input in agriculture, and practically guarantee full payment of grain purchasing funds. At the same time, the government should help guide farmers to vigorously develop modern agriculture and actively advance the industrialized process of agriculture. Second, create new income increase channels for farmers. Rural grass-root leaders should actively lead farmers to develop non-agricultural products with local features,a high added value and a good development prospect to promote the sustainable and steady enrichment of rural residents. Actively adjust the agricultural industrial structure, optimize varieties of agricultural products, improve quality of agricultural products and increase farmers' economic profits. Actively develop such large-scale agriculture as breeding and planting and realize a scale effect. Third, vigorously promote the progress of rural industrialization and urbanization and transfer surplus labor force in agriculture. In recent years, farmers' income increase has largely come from migrant workers' income from wages.Therefore, creating more job opportunities for farmers and gradually realizing urbanization of farmers are one of the main ways to increase farmers' income. The government should positively improve the employment situation of migrant workers, eliminate various discriminations and conduct employment skill training intended for migrant workers to elevate migrant workers' employment level in many aspects, perfect migrant workers' employment guarantee system and increase the proportion of farmers' income from wages.

To improve social security system of rural residents

First, establish and improve a new rural old-age insurance system to eliminate rural residents' worries about consumption. With the development of economy, the traditional rural old-age security system has become unsuitable for the needs of development of rural market economy. According to the speculation based on the national census results, in 2030, China will enter a peak period of aging population, which will account for more than 20% of China total population, of which, 70% will be rural population.Therefore, if the rural old-age supporting problem can not be solved as soon as possible, the consumption demand of rural residents can not be expanded and worse still, serious social issues will appear, which will do harms to social stability and economic development in China. Therefore, it is necessary for us to establish a new social security system suitable for the current economic situation as soon as possible. First, expand the coverage of new rural old-age security system. At present, the new old-age insurance covers less than 10% of China cities and counties. Second, vigorously supplement the funds for the rural old-age security system, raise funds from a number of channels and at the same time increase the government's efforts to grant subsidies (Ni, 2006; Li, 2006). The rural oldage security system has always been dominated by individual contributions, supplemented by collective contributions, with national supporting policies,which has led to insufficient social security funds and hindered the development of China rural old-age security undertaking.

Second, promote the new rural cooperative medical system and ensure treatment of farmers' diseases.Firstly, enhance the government's support, increase the subsidies for medical hardware facilities in rural areas and appropriately increase the proportion of payment.Secondly, place focus on the guarantee of serious illness, accompanied by small-amount treatment of minor diseases in rural out-patient clinics. In addition,perfect the supervision mechanism. Strengthen the supervision of the use of medical insurance funds and ensure the proper and the best use of funds (Li, 2009).

Third, improve the rural subsistence allowance system and increase the consumption ability of rural low-income groups. The rural subsistence allowance is the most basic, most important and the last social safety net of the whole social security system. Establish in the social security system as a whole, the last social safety net. Provide complete rural minimal living security to strengthen the consumption ability of rural low-income groups.

Fourth, attach importance to the establishment of a social security system intended for migrant workers,safeguard their legitimate rights and interests and bring into full play their consumption ability.

In view of the actual situation in rural areas, to establish and perfect a rural social old-age security system, it is imperative to pay close attention to improve specific measures for the migrant workers'social insurance system and the new rural social oldage insurance. Rationally determine the social security level and realize the sustainability of social security,while expanding the coverage of social security,stabilize the consumption expectation of rural residents and elevate the effective consumption demand of the whole society (Jiao, 2007; Qiao, 2008).

To perfect rural infrastructure construction,improve consumption environment of rural residents and advance construction of urban and rural infrastructure and equalization construction of public services according to idea of urban-rural integration

First of all, speed up the construction of running water facilities in rural areas. Strengthen and improve the supply of rural domestic water, improve water facilities in rural areas, universally popularize the construction engineering of rural running water to provide conditions for the use of such durable consumer goods as washing machines and water heaters and provide an excellent consumption environment for rural residents. Second, in terms of drinking water supply, accelerate the construction of rural drinking water safety engineering systems to ensure drinking water supply of rural residents. Improve the quality of drinking water in rural areas to ensure the safety and sanitation of drinking water of rural residents. At the same time, strengthen water price management of rural water plants, resolutely crack down on unreasonable and illegal collection of fees and protect the legitimate rights and interests of farmers. Finally, scrimp and save, pay attention to the management, repair and maintenance of the rural running water system, lower the pipeline leakage rate and water producing cost,and reduce rural water costs in many aspects so that farmers can really use affordable safe and sanitary water.

Second, speed up construction of rural electric power facilities and optimize the rural electricity consumption environment. The implementation of"home appliances going to the countryside" has not only considerably increased the electricity consumption for living in rural areas, but also raised higher requirements for power supply and grid construction in rural areas. First, expand the coverage of rural grids,increase the input in power transformation equipment and actively develop small-scale electric power engineering; second, advance the rural power system reform, strengthen rural power management and standardize rural electricity consumption order; third,carefully carry out the rural electricity consumption fee collection reform measures, comprehensively implement the policy of the same price in the same grid for both urban and rural grids, improve the quality of electric energy, ensure the stability of rural electricity, optimize the electric power consumption environment, provide conditions for rural residents'better consuming electric power products and expand the rural market of electric power products.

Third, actively promote the development of rural transport and increase efforts to construct, maintain and management rural roads. Transport is a cornerstone of economic development and construction of good rural roads is an important measure for improving rural the living environment of rural residents, which will help pull the consumption demand of rural residents.Relevant departments should take various measures to actively promote the development and improvement of rural transport. Improving the situation of rural transport can facilitate the "going out" of agricultural products and "coming" of industrial products, promote trade between urban and rural areas, and contribute to the economic prosperity of countryside.

Fourth, actively promote the equalization of rural and urban infrastructure and public services. To better pull rural consumption and promote further upgrade of China consumption needs, we need to promote further improvement of rural infrastructure and public services, which requires us to advance the equalization construction and simultaneous development of rural and urban infrastructure and public services.Only through simultaneous development, can the advancement in accordance with the same standard,construction commencement at the same time,completion and delivery at the same time be ensured,which can better promote the development of urbanrural integration, better promote the development of rural infrastructure and public services and better promote the consumption upgrade of rural residents.

To improve rural consumption market, focus on development of rural modern circulation mode

First of all, strengthen the management of rural markets, establish specialized management organization to conduct unified and standardized management of rural markets, based on which strengthen market supervision and inspection work and all relevant departments should inspect rural markets by law on an irregular basis, and promote the smooth functioning of rural markets and make efforts to solve the "bottleneck" issues that affect the consumption of urban and rural residents. Second, China should bring in preferential policies to encourage large retailers to enter rural markets and developing rural markets.Encourage various investment subjects to enter the agricultural material circulation field; establish a new supply system, with agricultural production material distribution centers as hubs and agricultural material supermarkets and convenience stores as terminals;and form an agricultural material circulation system featuring co-existence of multiple ownerships and wide coverage. Actively guide enterprises to study the characteristics of rural consumption, develop marketable commodities in view of farmers' needs,produce products characterized by low price, high practicability, convenient use and reliable quality, and expand after-sale service and technical support to rural areas.

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