Money matters

Thanks to the nation's rapid economic growth, the average income of rural and urban residents has risen substantially in recent years. And their investments, such as stocks and housing, have begun to contribute to this rapid income growth.

Property income, as part of the total income of a household, includes revenue generated by the financial assets or fixed assets such as housing, land and securities. In October, top leaders of the Communist Party of China said during the 17th National Congress that the government should help enable more citizens to own property for income. This is the first time the Party voiced its intention to allow more individuals to own legitimate private property.

Over the years, the average income of Chinese citizens has increased rapidly. According to the National Bureau of Statistics, China's disposable income per capita reached 11,759 yuan in 2006, a year-on-year increase of 9.2 percent after adjusting for inflation.

Property income is growing even faster. In 2006, the average property income of urban residents stood at 244 yuan, up 139.2 percent compared with 2002. With the robust development of the stock market and real estate industry, securities, funds and housing have become important investment vehicles for residents.

Meanwhile, bank deposits continue to grow under a great need for residents to invest. Total bank deposits reached 17 trillion yuan in 2006, one of the world's largest.

Diversified income source

The ratio between people's income and their disposable income is an important benchmark to gauge affluence. Take the United States as an example, property income accounts for about 40 percent of total disposable income in the US, and more than 90 percent of American citizens own securities, funds and bonds. By comparison, by early October 2007, there were 120 million securities accounts and another 90 million fund accounts in China. The combined number accounts for only 10 percent of the total population.

China's enormous tally of individual deposits also means great investment demand. According to statistics from the People's Bank of China, the total outstanding deposits of local banks has grown to 39.1 trillion yuan as of the end of October 2007, including 17 trillion yuan coming from urban and rural residents. This means an average savings of 13,000 yuan.

The stock market remains a promising investment area. In 2005, the market value of A shares in China was just 3 trillion yuan. However, with a spate of blue-chip companies' public offerings, the stock index has surged to more than 5,000 points, compared to around 1,200 points in January 2005. The total market value has grown ten times to hit 30 trillion yuan.

According to statistics of the China Securities Regulatory Commission, as of the end of September 2007, a total of 1,517 companies were listed on the mainland, with a total market value of 25.3 trillion yuan, exceeding that of Hong Kong.

Given the favorable environment, property income will likely grow further in years to come. But a sounder market situation should still be created to spur property income growth.

Firstly, the government should spare no effort to eliminate adverse elements that are dampening residents' income growth and their intension to diversify investment channels. Government regulations will directly affect the value maintenance and appreciation of personal wealth.

Secondly, increasing residents' income is key to fostering economic development. Property ownership is the prerequisite for property income. More support should be given to low-income earners in particular, to allow them have their own property. Meanwhile, the government should establish a nationwide social security system by increasing public payouts in order to guarantee people's basic livelihood.

Thirdly, the government should create a more transparent market environment for investment by establishing a sound capital market mechanism. In the current capital market, many historic problems and regulatory defects still exist, which can be solved by improving the market mechanism.

Fourthly, we should improve people's awareness of investment risks and educate people to make rational investment decisions, which will result in stable property income growth.

The author is a senior expert with the National Bureau of Statistics

(China Daily 12/29/2007 page5)