The Effect Of Agricultural Cycles On Business Cycles In China

China is a big developing country. The dual structure problem in the industrialization is still quite serious. Since the reform and opening- up, the pull of aggregate demand, especially investment, has been the first force of economic fluctuations. Over investment always induces economic boom and high inflation. Then the market force makes resources inevitably go to the secondary industry and the tertiary-industry much more than the agriculture. This will make the dual structure more unbalanced, and decrease the comparative advantage of agriculture, which induces the decrease of the agricultural production and rise of the price of agricultural products. As we know, the agricultural products are the important parts of household consumption in China. So the rise of agricultural products price will lead to higher inflation. Thus the government has to adopt the tight policy to suppress investment and increase the input to agriculture. To sum up, the agriculture cycles have relativity with the business cycles in China, although the agricultural fluctuation is not the first force, but the second one of the economic fluctuation which intensifies the latter.Through the tendency and cointegration analysis, this dissertation finds the long-term relationship between the agriculture cycles and the business cycles. Through theoretical and empirical research, the author sets the circular conduction mechanism—"the change of investment -> agricultural fluctuation ->economic fluctuation ->fluctuation of investment and agriculture again". The policy implication of this dissertation is that the government should strengthen the macroeconomic control to encourage the sustainable investment on agriculture,establish the mechanism that industry feedbacks agriculture and realize the balanced development between agriculture and industry. This will promote China's industrialization and modernization, and achieve sustained economic growth.