Tuesday, January 31, 2012

Dissecting 2011 Income Statistics

The National Bureau of Statistics reported that rural household income rose faster than urban income in percentage terms during 2011. However, rural Chinese people remain poor in absolute and relative terms. Agriculture is now a minor source of income for rural households. "Rural" is no longer synonymous with "agriculture."

The statistics are based on NBS's household surveys: 74,000 rural households and 66,000 urban households who fill out records of income and expenses over the course of the year. The average per capita rural household income was 6977 yuan in 2011, about $1090 per person per year or $3 per day. The average income was up 17.9% in nominal terms and 11.4% in real terms after deducting inflation. The increase was .5 percentage points faster than in 2010.
Average (blue) and median (yellow) household income for rural (left) and urban (right) households in 2011.

Urban household disposable income, meanwhile, averaged 21,810 yuan ($3,400) per person. This is still over 3 times the average rural income. Urban income was up 14% in nominal terms and 8.4% in real terms. Salary income was up 12% (attributed to increases in minimum wages in many places), but business income was up 29%--attributed to a good business environment and a cut in taxes for private businesses. Financial income was up 24.7%, due to rapid increases in rental income.

The rural population is slowly being transformed from "farmers" to "workers." Rural income from salaries and wages averaged 2967 yuan ($464) per person and was up 21.9%. Wages contributed 42.5% of rural income (up 1.4 percentage points from 2010) and accounted for half of the growth in rural income.

Rural net income from agriculture averaged 2520 yuan ($394) per person. This accounted for 36 percent of rural income--less than the 42.5% from wages. Of the agricultural income, 1897 yuan came from crops and 463 yuan came from livestock. Net income from growing crops was up 10%--60% of the increase was due to higher crop prices and 40% was due to increased volume of sales. Livestock income was up, primarily due to higher prices, after two years of declines. The report noted that farmers who grew cotton and potatoes had low income or even losses due to declining prices for their crops.

An interesting comparison is this: the increase in average urban household income (2700 yuan) last year was equivalent to 39% of rural income and was more than rural households earned from farming (2520 yuan).

Rural income from operating manufacturing and service businesses averaged 702 yuan per person. Service business income was up 21.4% but manufacturing income was up a less robust 5.8%.
As the share of income derived from agriculture falls, Chinese officials worry that their peasant class are losing interest in farming. Solution: give them stipends from old-age pensions and land rent and warehouse them in apartment blocks. Turn the fields over to companies and big professional farmers.

Unearned income from transfers and financial revenue is emerging as an important source, but it's still small for rural people. Rural households got 11% of income from transfers and financial payments; the report trumpets the increase in income from the new rural old-age pension scheme. But urban households got 26% of their income from these "unearned" sources. The small share of income from financial sources (3%) reflects China's low interest rates and aversion of companies to paying dividends.
Rural household income sources for 2011: salaries 42.5%; household businesses 46.2%; transfers 8.1%; financial income 3.3%.
Urban household income sources: salaries 64.5%; business 9.2%; transfers 23.8%; financial income 2.7%.

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