Improving the structure of national income distribution and deepening supply-side structural reform

LIU Wei1 CAI Zhizhou2

(1.Renmin University of China 100872)
(2.China Center for National Accounts and Economic Growth Research, Peking University 100871)

【Abstract】The macro-distribution structure of national income in China has changed significantly since the ownership system reform at the end of the last century. Between 2004 and 2013, China held three large-scale national economic censuses. Data analyses show how the national distribution structures of different institutional sectors changed and how these changes influenced micro- and household income distributions during this period. A new basic socialist economic system and various coexisting ownership components have been developed and public ownership has been established as the main body since the ownership reform. As the socialist market’s economic system has gradually replaced the traditional planned economy, China’s income distribution depends on not only labor, but also other production elements such as capital, land, technology, property and management. Therefore, the distribution and redistribution of national income has changed significantly and become more complicated. Furthermore, the relationships between the non-financial enterprise sector, the general government sector, financial institutions and households have changed in terms of not only content, but also structures. The new distribution system has stimulated productivity and encouraged China’s economic growth and development. It has also imbalanced the national distribution, which will probably affect long-term supply-demand balance and economic development. This thesis analyzes the structural changes, trends and characteristics of national income distribution after the new century using data from three national economic censuses. It makes some important observations and conclusions. From 2004 to 2013, the proportion of income and outlay of property of the gross national income increased from approximately 10% to approximately 18%, the proportion of employee compensation in non-state-owned sectors increased to above 85% and government income from land rent increased significantly, meaning that the contents and structures of national income in China changed significantly. In the field of national income redistribution, the proportions of disposable income in the nonfinancial enterprise sector and national disposable income in the general government sector decreased, but increased in the financial and household sectors. Investment in the non-financial enterprise sector maintained a high growth rate, which relied on the high saving rate of the household sector. The capital formation of the non-financial enterprise sector, especially state-owned enterprises, relied highly on the saving of the household sector. The financial institution sector was the bridge between them. The high saving rate promoted economic growth. Long-term potential financial risk gradually increased. The gaps in disposable income in the household sector increased and then decreased. The turning point occurred in 2008. Census data show that household income gaps in China between urban and rural areas, different regions or different industries are related. A lower income per capita in a region means that it has a higher proportion of rural people or of agricultural employment, a lower level of industrial structure development and a higher Gini coefficient. Low income per capita in a primary industry, which is mainly agriculture in China, is the main factor influencing income distribution in the household sector today. This induces negative impacts from the supply side to curb aggregate demand. It is important to promote urbanization to improve the transfer of the labor force from the agricultural to non-agricultural industries, especially to non-state-owned enterprises with a better capacity to absorb employment. The reform of state-owned enterprises should be deepened to strengthen their competitive power, and the gap in income per capita levels between state-owned enterprises and other enterprises should be reduced. As the proportions of both high-and low-income groups decrease, the proportion of those in the middle-income group will increase, thereby improving aggregate demand and its structure. Therefore, it is reasonable to improve macro-and micro-income distributions from the supply side to efficiently and properly increase demand.

【Keywords】 supply-side structural reform; macro-distribution of national income; structure of income distribution;

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    Footnote

    [1]. ① See Marx. 资本论(Vol. 1 & Vol. 3). Beijing: People’s Publishing House, (1975).

    [2]. ① Since each factor expenditure corresponds to a factor income, the total amount of income and expenditure in a closed economy should be equal, but if it is in an open condition, and there are factor incomes from abroad, factor income and factor expenditure may be different.

    [3]. ① The proportion of government’s factor income–the net production tax in national income decreased (more than 2% in 2004–2013), but the proportion of government’s net property income in total income after the primary distribution increased (from −2.5% in 2004 to 11% in 2013).

    [4]. ② From the perspective of ownership, the income of the private enterprises is still privately owned after it is legally taxed, but if the business owners do not transfer the money to households and pay the personal income tax, but keep it in the enterprises, then, from the perspective of national income accounting, these incomes are still in the enterprise sector rather than in the household sector. The income distribution of residents and the Gini coefficient calculated on this basis usually do not include these incomes. In addition, some business owners include the household expenditure on the accounts of enterprises and in the production costs, so that they do not need to pay personal income tax, which underestimates the real income distribution gap. This phenomenon exists in all countries of the world.

    [5]. ① “Laborers” and “practitioners” are not identical concepts. In addition to employees of enterprises and other units, practitioners also include private entrepreneurs. Therefore, that practitioners are used to classify different types of laborers statistically is only an approximate estimation.

    [6]. ② In the latest input-output table of China, there is no “business surplus” in the agricultural added value, and the income of agricultural labor is all included in “labor remuneration,” but it is different in some self-employed households, including not only the employers whose incomes are included in the added value of the household sector (after deducting the labor remuneration), but also the employees whose incomes are included in labor compensation. There are also some unlicensed self-employed households with similar incomes, which are not included in the third economic census.

    [7]. ① See Xi Jinping, Speech at the 13th Meeting of the Leading Group for Financial and Economic Affairs, in Party Literature Research Centre of the CPC Central Committee (ed.) 习近平关于社会主义经济建设论述摘编. Beijing: Central Party Literature Press, 106–107 (2017).

    [8]. ① As to the distribution of employees according to per capita labor remuneration of the national economy, since the data come from the input-output table, the remuneration of agricultural and non-agricultural workers is under the same statistical standard, which is in line with the national income indicator (a component of GDP), so there is no problem of the inconsistent statistical standard of income of urban and rural residents, that is, there is no difference in the statistical standard and connotation of the disposable income of urban residents and the net income of rural residents.

    [9]. ② The upgrading of industrial structure is the measurement of the share and proportional relationship of different industries. It is essentially the measurement of labor productivity (Liu et al., 2008).

    References

    Marx. 资本论(Vol. 1 & Vol. 3). Beijing: People’s Publishing House, (1975).

    Liu, W. et al. 经济增长与结构演进: 中国新时期以来的经验. Beijing: China Renmin University Press, (2016).

    Liu, W., Zhang, H. & Huang, Z. Economics Perspectives (经济学动态), (11) (2008).

    Lin, G. China Review of Political Economy (政治经济学评论), (1) (2015).

    Su, J. in Finding the Way Out for Chinese Economy (寻求突破的中国经济). Beijing: China Renmin University Press, (2017).

    China Center for National Accounts and Economic Growth Research, Peking University. China Economic Growth Report 2015 (中国经济增长报告2015). Beijing: Peking University Press, (2016).

    Party Literature Research Centre of the CPC Central Committee (ed.) 习近平关于社会主义经济建设论述摘编. Beijing: Central Party Literature Press, (2017).

This Article

ISSN:0577-9154

CN: 11-1081/F

Vol 52, No. 08, Pages 4-16

August 2017

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Article Outline

Abstract

  • 1 Formation of the basic system of socialist society and the evolution of the primary distribution of national income
  • 2 Development of socialist market economy and the redistribution of national income
  • 3 The ultimate use of national disposable income and the formation of the characteristics of the national economy
  • 4 Evolution of industrial structure and the expansion of the middle-income group
  • 6 Main conclusions
  • Footnote

    References