CRI听力:Widening Income Gap Hampers China's Domestic Consumption

According to official statistics, the ratio of consumption to GDP has dropped from 62 percent to 47 percent over the past decade here in China.

At an economic conference at Peking University, Justin Lin, former Chief Economist for the World Bank, says the reduction of domestic consumption is, in part, because of an unbalanced accumulation of wealth in this country.

"Before the 1990s, the household income contributed to 70% of the GDP, and now it has dropped down to 35%. So, you can see wealth has been accumulated in the corporate sectors and with the wealthy. And we know rich people. Their propensity for consumption is lower, which contributes to higher savings. Domestic consumption is reduced because consumption propensity is repressed.'

Statistics show Gini coefficient, an index reflecting the rich-poor gap, was 0.39 for rural areas in China last year, close to the alarming level of 0.4. Meanwhile the figure for urban areas stood at 0.33.

Huang Yiping is the Chief Economist of Emerging Asia at Barclays Capital.

"I think the reason why household income declined, or stayed at a very low level, is because of financial repression, which is more stringent than in other countries. This causes it to have a significant effect in terms of percentage points for the GDP."

Li Daokui, a leading advisor to the People's Bank of China, says creating more disposable income for people is preferable to simply throwing around more government stimulus money, suggesting the first round of stimulus unveiled 3-years ago didn't work well enough.

"We calculated two major items. One was automobile programs, which accounts for 0.3% of the increase in our consumption. The other subsidies were for a home appliance program for rural households. It is only about 9.2% for the increase in household consumption."

Li Daokui is suggesting one of the main changes that needs to be made is to China's Household Registration System, or Hukou, given that it restricts benefits to migrant workers, forcing them to save money for essential services, rather than spending it.
 
For CRI, this is Zhang Shuangfeng.