Recently, the National Bureau of Statistics released the semi-annual report of China's economy of 2016. In the first half of the year, the per-capita disposable income of China's residents rose 6.5%in real terms, compared with 6.7% for the same period. The rate of residents' income growth fell behind with GDP growth rate aroused people's concern. The expert pointed out that, China's economic transformation and upgrading with the replacement of old forms and elements with new ones to optimize the configuration will lead to a surge in the pressure of economic going downward in certain period of time, thus will affect residents' income. But we also see that household income is not likely to grow faster than GDP at all times. But there is no need to make a fuss about short-term fluctuations as long as the income growth trends is strong and the prospects are good.
Still faster than per capita GDP growth
As to why did household income fell behind with GDP in the first half of the year, Zhao Xijun, deputy dean of the analysis of Institute of finance, Renmin university of China, concluded that there were three main reasons. Firstly, as the economic growth going downward since 2014, some enterprises run into trouble, bringing down the overall level of income. Second, wages in the pay industry are growing slowly. Third, fields of income that taken into account are mainly traditional industries, while the income of recently emerged innovative industries and freelance work is not counted, which had been grown the most robustly in all fields.
Yao Jingyuan, the special researcher of the Counselors’ Office of the StateCouncil, indicated that on the one hand, it wasn’t easy to keep the income growth rate around 6% with considerable pressure of the economic going downward; On the other hand, as we push forward supply-side structural reform under the premise of appropriately expanding aggregate demand in the future, if our economy remains stable or with steady progress, the income will remain stable. Yao said that in the long term, the goal of “doubling the annual income by 2020” will not change, and that for some quarters, it shouldn’t be paid excessive concern if the residents’ income would not catch up with GDP.
On July 17th, Wang Pingping, director of the office of the National Bureau of Statistics Household Survey wrote, in the first half of the year, residents' income growth and economic growth are basically equal, but there are also problems of how to see or understand it. In the article, Wang Pingping gave some more interesting details.
For example, the average growth rate of residents’ income per capita during 2013 to 2016H1 is 7.5%, while the average growth rate of GDP in the same time is 7.0%. The trend of household income surpass GDP is unchanged.
Another example is that, although per capita income growth in the first half of the year is slightly lower than overall GDP growth, it is still faster than the per capita GDP growth rate, which is 6.2%. In addition, in the first half of this year, the real growth rate of rural residents' income was 6.7%, faster than that of urban residents, which is 5.8%, both well coordinate as before.
Elements reconfiguration accompanied with transformation
Encountering a bend while driving, drivers tend to slow down first and then speed up again. In this process, the consumption of fuel, the speed of wheels, the track of car and a number of other indicators will change accordingly. Similarly, the process of economic transformation must be accompanied by the reconfiguration of elements and changes in the income basis and structure of residents.
Quan Heng, researcher of the institute of world economic at Shanghai Academy of Social Sciences, pointed out in an interview that, China's economy is under rapid and profound transformation, the new economy will bring changes to the original income structure, residents' income growth and GDP growth alternate and dislocation are normal phenomenon in a certain period of time. Overall, the current residents’ income and economic growth are within a reasonable range.
“In fact, residents’ income growth won’t surpass GDP at all times, so long as the two positively affect with each other, and maintain a long-term trend of growth.” said Quan. When the economy transformation arrives at a certain level, the return of all elements, labor included, will further improve; residents’ income will also reach a higher starting point with higher basis coming from the new economy.
In fact, these views can also be verified from the ongoing changes in the income structure. According to the National Bureau of Statistics, in the first half of the year, the growth rate of per capita wage income in sectors such as real estate, education, health and public administration are about 15%; the growth rate of per capita wage income in industries such as transportation, warehousing post, information technology services, finance and entertainment are about 10%; per capita wage income in industries such as leasing and business services and residential services are more than 7%.
Experts point out that it is the higher growth rate of service industry that effectively offset the lower rate of growth or even negative growth from traditional manufacturing, wholesale and retail, mining and other industries, maintaining the residents' wage income growth at a relatively high level.
Income growth remains secure
Periodic adjustments do not worth excessive concern. We are confident that we can outperform in the long term. Several analysts said that, with the effects of supply-side reform and economic transformation coming up and the develop of the new industries, it is secured to say that residents’ income will surpass GDP.
In the face of China's economic half annual reports, the German news television reported that over the past few decades, the world economy largely depends on China's rapid economic growth, and the new data shows that China's economy is in a trend of steady growth, because China's economic transformation is gradually on the right track.
“Previously, China's economy was mainly driven by investment, with high return on capital and low cost of labor factors, which led to the lagging behind of economic growth. Today, China is transiting to a higher quality of development, which is essentially to share the fruits of economic development. On the one hand, the spillover effect of scientific and technological innovation will lead to the improvement of labor productivity, thus increasing the income of workers; on the other hand, the deepening of reform of the income distribution system will make the initial allocation more reasonable, deepen the integration of urban and rural areas, rapidly promote the income in low-income area, finally let the amount of household income growth and the structure optimized.” Said Quan Heng.
Tian Lihui, professor at the Institute of Financial Development at Nankai University, suggests that in the future, we should increase the input of social security, including the increase of medical facilities, the social security of all kinds of difficult workers, etc. At the same time, we should consider appropriate reduction of individual income tax so that residents have more disposable income to consume.
