China’s social net wealth second highest, while imbalances need attention

By Xie Jun Source:Global Times Published: 2018/12/27 22:23:44

Globalization drives gains, but imbalances require reform


Photo: VCG



 

China's net social wealth - the total of non-financial assets and net foreign assets - ranked second in the world behind the US as of the end of 2016, according a recently released report jointly compiled by several organizations.

Experts said that China's net social wealth still has huge scope for growth. The figure can surpass that of the US if the government can "unlock some institutional shackles" such as investment restrictions on rural land, one economic expert told the Global Times on Thursday.

According to the report, which was released by the National Institution for Finance & Development along with two other Chinese organizations on Wednesday, China's net social wealth reached 437 trillion yuan ($63.66 trillion) at the end of 2016, equal to about 70 percent of the US total.

Like GDP, net social wealth is an important index of national strength.

China's GDP grew at 6.7 percent in 2016 and the rate was 6.9 percent in 2017. In the first three quarters of this year, the GDP growth rate was 6.7 percent.

Wealth distribution

Tian Yun, director of the China Society of Macroeconomics Research Center, told the Global Times on Thursday that China's rapid wealth creation and accumulation resulted from the country's participation in economic globalization, which has been beneficial for all Chinese people.

"Behind China's gigantic wealth is a mixture of factors such as the vast labor pool, the government's low tax on fixed assets and China's active participation in global economic activity," Tian said.

At the same time, China has an uneven distribution of wealth. In terms of private wealth, the majority is held by a very tiny elite group, which has aroused worries among economic experts.

The situation needs to change, Tian said, adding that the imbalance is the biggest barrier to China's wealth expansion.

A list of billionaires released by Forbes magazine in March 2018 included 476 Chinese people, second in the world.

"I think a major way to solve wealth imbalances is to open up investment channels between rural and urban China. Currently, rural people don't have enough rights in urban areas, while urban capital can't easily enter rural markets. The government should take measures to marketize rural land by allowing outside capital to invest in rural property, which will be effective in bridging income gaps between rural and urban areas," he said.

If China can remove the institutional obstacles between rural and urban areas, it won't be hard for the nation to surpass the US in terms of social wealth, Tian said.

Ye Hang, an economics professor at the College of Economics at Zhejiang University, also said that the government has made some efforts to create a progressive tax system, which can help distribute wealth in an even way. But he said that such efforts are too small and too slow, compared with some countries in the West.

Government wealth

The report showed that the proportion of wealth owned by the Chinese government is at a relatively high level by international standards, which experts said is necessary.

In 2016, about 73 percent of social wealth was held by the public, while 27 percent was held by the government. That's a relatively high proportion compared with many developed countries, the report pointed out. For example, the proportion of government-held wealth only accounted for less than 5 percent of the total in Japan and German in 2016, the report showed.

"China has been more or less exempt from the economic crises faced by Asian countries in the past... a big reason for that is, I think, the wealth held by the Chinese government as a kind of backing," Ye told the Global Times.

According to Ye, it's more important that the government should use this capital in a more transparent way to ensure that it benefits ordinary people.


Newspaper headline: Nation’s wealth on the rise


Posted in: ECONOMY,BIZ FOCUS

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