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Why Stimulate? Rising Chinese Incomes Are Defying GDP Slowdown

Tuesday, October 21, 2014  
Posted by: Karen Kistenmacher
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Why Stimulate? Rising Chinese Incomes Are Defying GDP Slowdown

By Bloomberg News - Oct 21, 2014

China’s economy is slowing. Yet for the person on the street, incomes are rising, jobs are secure and inflation is restrained, helping explain the government’s restraint in eschewing broad-based stimulus.

Obscured among the avalanche of data accompanying today’s report that China’s economic growth slowed to the weakest pace since 2009 in the third quarter are income statistics. They showed a rising share of output in the world’s second-largest economy is landing in the pockets of its citizens.

Urban resident’s disposable incomes rose 9.3 percent in the first three quarters from the same period a year ago, while rural resident’s cash income jumped 11.8 percent, the National Bureau of Statistics said. Monthly wages of the 176 million migrant workers who fill factories and construction sites are also rising, the statistics agency said.

“It’s part of the new normal that people benefit more from economic growth,” said Su Hainan, a vice president with the China Association for Labor Studies, a research unit in Beijing that advises the government. “So it’s becoming less necessary for the government to stimulate growth.”

China’s middle class -- more populous than the combined peoples of France and Germany -- is leading a surge in consumer power that’s creating billionaires like Alibaba Group Holding Ltd.’s chairman Jack Ma. Rising incomes and spending are also underpinning an economy weighed by a property slump.

Consumption contributed 48.5 percent to gross domestic product growth in the first three quarters, statistics bureau data showed, from 45.9 percent in the same period last year.

Strong Jobs

Despite the economy’s slowdown, the surveyed jobless rate in Chinese cities remained about 5 percent through the January to August period, Premier Li Keqiang told a forum in Tianjin last month. China’s consumer-price index rose 1.6 percent in September, data showed last week, below estimates for a 1.7 percent gain and down from August’s 2 percent increase.

Labor authorities in Guangdong, China’s manufacturing powerbase, said the benchmark guideline for wage increases was 9 percent for 2014. In Hebei province, which reported the second-lowest GDP growth in the first half, the government last week announced it will raise minimum wages by an average of 12 percent this year.

Inequality is the downside of the incomes story: Per-capita cash income of 8,527 yuan ($1,400) for the nine months through September in rural China was less than half of the 22,044 yuan urban disposable income.

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