The Principal Components Regression Analysis of Consumption among the Chinese Rural Residents

The relevant data concerning rural residents consumption was treated by use of the principal components method for dimensionality reduction, and meanwhile the multicollinearity between the explanatory variables was diminished; then the four influencing factors(the rural residents per capita consumption expenditure, the rural residents per capita net income, the per capita savings deposit, the per capita GDP and the consumption price index)were subjected to a principal components regression analysis. The empirical analysis shows that the four factors exert a significant effect upon the rural residents consumption needs; and a further analysis of the model finds that in recent years the maximal impetus behind the rapid growth of consumption comes from the constant rise of the commodity price rather than the increased consumer motivation. In the end, the empirical results were given a reasonable economic explanation