The National Bureau of Statistics of China published the "Statistical Communiqué of the People's Republic of China on the 2018 National Economic and Social Development" through its website on February 28, which revealed that China's disposable income per capita stood at 28,228 yuan in 2018, up 8.7% YoY, and up 6.5% in real terms after deducting price factors. The median disposable income per capita was 24,336 yuan, up 8.6%. At the same time, China's GDP grew by 6.6%. Taking population growth into account, GDP per capita grew by 6.1%. The real disposable income per capita growth rate was slightly lower than that of the GDP, which is in turn higher than that of GDP per capita. This has basically met the goal of "synchronizing household income growth with economic growth", which was raised in the outline of the "13th Five-Year Plan".
As the economic downturn intensifies, the slowdown in household income growth last year was a foreseeable situation. However, although the goal of "synchronizing with economic growth" has been achieved, the slowdown in the growth rate of household income actually reflects the current state of the economy. It actually has a series of interactions with economic growth, employment, and consumption. This phenomenon would have a great impact on the future economic growth which requires both regulators and market participants to be vigilant.
First, from the perspective of household income structure, the trend of the high growth rate of rural household income is continuing because it is supported by the factors such as labor shortage and government investment. On the other hand, the growth rate of urban household income has faced bottlenecks. Separately, urban disposable income per capita reached 39,251 yuan, up 7.8% YoY and up 5.6% in real terms after deducting price factors. Rural disposable income per capita reached 14,617 yuan, up 8.8% YoY and up 6.6% in real terms after deducting price factors. With the implementation of the rural revitalization strategy and poverty alleviation policies, the income of rural households has been continuously improving, and the urban-rural gap has been further narrowed. This is beneficial to the entire income structure. However, it should be noted that the growth rate of urban household income in last year was 1 percentage point lower than the national level, which indicates significant slowdown in urban household income. In terms of correlation, the slowdown in urban economic growth is intensifying. The slowdown in urban economics can be said as a stalling risk of economic growth.
Secondly, the slowdown in household income has also directly affected consumption and posed challenges to "steady economic growth". The data shows that China's household final consumption expenditure per capita reached RMB 19,853 last year, up 8.4% YoY, and up 6.2% in real terms after deducting price factors. Separately, urban final consumption expenditure per capita reached RMB 26,112, up 6.8% and representing an increase of 4.6% in real terms after deducting price factors. Rural final consumption expenditure per capita reached 12,124 yuan, up 10.7% and up 8.4% in real terms after deducting price factors. With the increasing proportion of consumption demand in the national economy, the slowdown in household income will affect the consumption expenditure. This in turn will have a negative impact on the expansion of China's consumer market and the progress of improvement in consumption quality. Moreover, the positive correlation between income and consumption will create a vicious circle for the economy, which requires intervention when necessary. From the perspective of expenditure structure, sectors like housing, transportation and medical care are fast-growing in terms of the total expenditure. Per capita consumption on the housing sector reached RMB 4,647, up 13.1%, accounting for 23.4% of household final consumption expenditure per capita. Per capita consumption on the transportation and communication sector reached RMB 2,675, up 7.1%, accounting for 13.5% of household final consumption expenditure per capita. Lastly, per capita consumption on medical care sector reached RMB 1,685, up 16.1%, accounting for 8.5% of household final consumption expenditure per capita. This consumption structure reflects the rise in the cities' overall cost of living, and this will also reduce the potential of household income growth and the potential of the consumer market.
In addition, the slowdown in household income growth has reflected the present grim employment situation. In particular, the problem of urban unemployment has become increasingly obvious. Not only are traditional industries such as machinery manufacturing and automobile making downsizing, but internet giants in the innovation economy are having large-scale downsizing due to the bursting of the asset bubble. Of course, this is structural unemployment that occurs in the economic transformation from the manufacturing industry to the service industry, and this structural unemployment is not reflected statistically on the unemployment rate. However, it is one of the reasons for the slowdown in household income growth.
In fact, the key to increasing household income is to safeguard the economic growth rate. To increase household income, it is necessary to make sustained efforts to increase income, improve the income of the lower income group, expand the middle-income group and reduce income inequality. But above all, the first priority is to ensure steady economic growth. Through maintaining steady growth, promoting employment, invigorating the market, promoting basic social security and several measures that ensures people's livelihood, a high-quality ecological chain of the income distribution can be established. In turn, this ensures the return on investment, profit for enterprises, income for employees, and tax revenue for the government.
Final Analysis Conclusion:
Overall, although household income growth has achieved the target of being "not lower than the economic growth", it also reflects many economic structural changes and the deep-seated problems in economic development. Therefore, it is necessary to pay attention to it from the policy level to guarantee the steady growth to ensure employment levels, consequential increase of household income and thereby promotion of consumption and investment, forming a virtuous cycle of economic growth.
