According to the data concerning consumption and income in 55 Years of Statistics Chronicle of New China, China Statistical Yearbook, by using econometric model, this paper expounds the reason of shortage of residents’ consumption demand in China and tests the difference of marginal propensity to consume of China’s urban-rural residents. The results show that the urban residents’ marginal propensity to consume is greater than rural residents’ marginal propensity to consume in China, but the urban residents’ marginal propensity to consume tends to decline, while the rural residents’ marginal propensity to consume tends to rise. In terms of urban-rural income structure, consumption structure and consumption of consumer durables, this paper analyzes the reason of the change of urban-rural residents’ marginal propensity to consume, and it can be described from following 3 aspects: first, urban residents’ income is mainly wage and salary, while urban residents’ income is mainly operating net income. The urban residents are conservative towards the expected income, while rural residents are relatively optimistic towards the expected income; second, in comparison with rural residents’ consumption structure, the urban residents’ consumption structure has big proportion of unessential expenditure, so the income elasticity of consumption is big; third, the urban residents’ traditional consumer durables approach saturation, while the rural residents’ traditional consumer durables are still at the period of increase, and the urban residents’ purchase of emerging consumer durables is inhibited, with great fluctuation. Based on research results and actual situation, this paper puts forward that the key of spurring increase of China’s consumption demand is to expand consumption demand of rural residents.
