Analysis of Enhancement of Consumer’s Consumption by Microcredit Regulations from the Perspective of Legal Economics

Abstract

As the Chinese economy continues its development, so develops the consumption level of its consumers. The expanding consumption demand creates a contradiction to the relatively invariable income level, increasingly leading to Chinese consumers to utilize microcredit to help pay for their short-term consumptions. Microcredit can influence the behavior of urban resident consumption, and by regulating microcredit, authorities can adjust and regulate the consumption habits and patterns. A well-regulated microcredit system that protects consumers can enhance economic growth and provide an overhaul to consumption structure through increased consumption. This Article focuses to analyze the enhancement of urban resident consumption by microcredit regulations from the perspective of legal economics, studies the impact of microcredit on urban resident consumption, the change in consumption patterns in a regulated microcredit system, and theorize the economic necessity of a regulated microcredit system. This Article utilizes Resident Consumption Function Theory to analyze the relationship between consumer’s expected future income and current income, the result helps this Article understand the urban resident income status when taking microcredits. The growth of microcredit in China has increased significantly in recent years, from 12.4% a year in 2015 to 63.9% a year in 2020. With the rapid expansion of microcredit, so expands its proportion in the overall financial credit market, from 6.4% in 2015 to 16.3% in 2020, becoming increasingly an important influence of urban residence behavior and consumption pattern. By analyzing the yearly development of microcredit, this Article proposes that the microcredit market is growing in importance in the overall Chinese financial system, and a well-regulated microcredit system which protects urban residence is necessary for the future economic development of China.