A study of inadequate consumer demand among Chinese residents --based on data for urban and rural areas in different provinces

Using panel data from both urban and rural areas in China＇s thirty provinces, autonomous regions and municipalities （Tibet excluded） from 1995 to 2005 and applying the random effects model, we conducted a quantitative analysis of factors influencing urban and rural consumer demand. The findings show the per capita disposable income of Chinese residents is highly correlated with their per capita consumption expenditure and the consumption function of urban and rural residents was relatively stable over the eleven years under study. On the basis of these findings, this paper further makes use of data in China＇s funds flow statements （physical transactions） from 1992 to 2004 to explain one of the reasons for the continuing under-consumption since 1997-1998; that is, in the course of national income distribution and redistribution the government has gained an ever increasing share of total and disposable income while the share of Chinese residents shows a continuous decline.