1 Introduction

In the new normal state of economic development, the growth of investment and export continued to slow down, however, consumption became the main driving force of China’s economic growth. In 2015, the contribution rate of final consumption to economic growth had reached 66.4%, the year-on-year growth was 15.4%. However, is there an engine that will continue to promote the consumption in the future? Understanding the problem correctly and scientifically is the key to judge power and trend of China’s future economic growth. Besides, urban development is considered to be the new engine of consumption and economic growth in the next stage.

From the primary consumer of residents, the urban residents’ consumption is relatively at a stationary level, the majority of farmers and agricultural transfers will be the major groups to promote consumption growth in the future. Therefore, in the future, China’s largest consumer potential will gradually shift from urban to rural areas through urbanization, and simultaneous growth of urban and rural consumption is the key to ensuring the continuing growth of China’s consumption. However, after 30 years rapid development urbanization, the consumption difference between urban and rural is becoming large, the growing power of rural consumption is obviously insufficient, and the situation does not match with the classic urban-rural dual economic theory (Lewis, 1954; Ranis and Fei, 1961), this is deviating from the important goal of bridging the gap between urban and rural. So, has the development of China’s urbanization “twisted” the simultaneous growth of urban and rural residents’ consumption? If so, what is the impact path and trends? This study will answer these questions, to a complete and try to understand the characteristics of China’s urbanization process and its impact mechanism on residential consumption.

Past research Show that urbanization development can promote the consumption through promoting the formation of regional markets, and promote population and production factors’ accumulation and the formation of external economic mode (MacMillan, et al., 1972; Daniels et al., 1991; Fujita et al., 2000; Henderson, 2013). Herrmann (1967) pointed out that through the US household survey data analysis that urbanization impact on household food consumption effect was more evident. In addition, some scholars have studied the impact of urbanization on consumption from the theoretical aspect, such as Ioannides (1994), who established specialized urban systems model to analyze the impact of urbanization on consumption mechanism. Black and Henderson (1999)studied the steady-state level of consumption in the urbanization process on the balanced growth path through theoretical derivation. Different from the developed countries, the China’s urbanization started late. Maturity is relatively low, and because of historical and policy reasons, China’s urbanization process has its particularities, such as strict management of urban and rural household registration system, urban-rural welfare disparity and inequality of essential basic public services. These factors led to the particularity of urbanization in China.

Thus, to understand the impact mechanism, further research is still necessary. The essay uses China Provincial Panel Data to set up Panel Vector Auto-Regression model (PVAR), empirically analyzes the urbanization development influence on the level of consumption and consumption structure and assesses “distortion” effect of urbanization on consumption simultaneous growth of urban and rural areas.