How China will achieve people's income growth
- By Tang Jun
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E-mail China.org.cn, March 4, 2013
China is gearing up to double its gross domestic product (GDP) and urban/rural residents' per capita annual income by the year 2020, according to an 18th National Congress of the Communist Party of China (CPC) report released in November last year.
If the nation's goal is to double GDP growth, then increasing urban and rural residents' annual per capita income can be seen as the people's goal.
China's GDP in 2010 was 40 trillion yuan (US$6400 billion). In the same year, urban residents' annual per capita income was 19,109 yuan (US$3057), while the figure for rural residents was 5,919 yuan (US$947).
Based on these statistics, the nation's goal will be to achieve a GDP of 80 trillion yuan, while the people's goal will be a per capita income of 38,218 for urban dwellers and 11,838 for those living in the China's rural areas.
The nation's goal and the people's goal are interconnected in that GDP growth ensures a better livelihood for Chinese citizens, but does not naturally mean the progress of society and the advancement of people's welfare.
The government's macroeconomic agencies have expressed optimism in regards to achieving the national goal. "China's GDP increased by 9.3 percent year-on-year in 2011; the annual GDP in the following nine years only need to grow by 7 percent on average to meet our goal," said Mr. Zhu Zhixin, vice minister of the National Development and Reform Commission (NDRC), the country's top economic planning agency. Zhu noted the goal was close to reality, and was "consistent with the development pace set in the Twelfth Five Year Plan (2011-15)."
The Chinese Academy of Social Sciences (CASS) is also optimistic, but has hedged its prediction to 6.9 percent, according to CASS' deputy director Li Yang.
The income doubling goal also has so far received optimistic responses from both government and academic circles. Sheng Songcheng, head of the research and statistics department at People's Bank of China, the country's central bank, said that the income growth plan should be based on consistent pricing, and needs to exclude variable price factors.
The scheme requires an average annual growth of 7.2 percent to be successful. The rapid growth as seen in 2011 – 9.9 percent – will make the following years easier. According to central bank projections, the remaining nine years only requires an average of 6.9 percent growth in per capital income to meet the goal. "Doubling per capital income may even be achieved one or two years ahead of time," Sheng said.
While economists are confident of macro growth, ordinary Chinese citizens have their own opinions regarding the income plan.
Granny Sun and her husband now make 9,000 yuan (US$1,440) each month. "By that standard, I can soon replace the old TV and fridge with new ones; we can also afford to plan several trips each year," she said.
Mr. Chen and his wife live in a rented flat without central heating in Beijing; they make 7,000 yuan (US$1,120) per month. "If our income doubles, I will immediately go rent a two-room flat, with proper facilities including air conditioning, a washroom and a kitchen. Then, we will see ourselves as rooted in Beijing," he said.
Ms. Dong, a waitress at a local restaurant, was earlier reported as saying that she "hadn't eaten meat for half a month," not because she was on diet, but because she couldn't afford it. Her remark sounded suspicious to some, but nonetheless provoked the public's attention as she said: "In the future, I don't know how the government will help people like me double our income."
According to the National Bureau of Statistics' (NBS) data of 2010, polarization of household income is on the rise, with the top 10 percent of households earning 10.85 times as much as the bottom 5 percent. Simply doubling household income won't fix the problem.
NBS data indicate that at least 60 percent of households had an income below the national average. Media reports have shown that in 2011, Chinese urban residents' medium disposable income was 19,118 yuan (US$3509), 2,692 yuan (US$431) below the average. This data suggests an abnormal wealth distribution.
An economic plan to double household income would be well-received, but there are subtle problems at stake. A higher GDP does not necessarily raise per capita income and does not guarantee income distribution equality.
Fair and equal social wealth distribution channels are needed to create positive change at the grassroots level. First, individual households deserve a larger share of national income, meaning more people have access to wealth. In China we see government agencies and the industrial sector receive an overwhelming amount of capital.
Second, impoverished households should receive favorable treatment.
Creating a fairer wealth distribution system in China will be difficult, and employers will not easily support such reforms. There are two possible solutions to this problem: negotiations between companies and their employees – with mediation provided by the government or trade unions; or tax cuts in the private sector.
The author is a social policy researcher with the Chinese Academy of Social Sciences.
This article was first published in Chinese and translated by Chen Boyuan.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
