(Yicai Global) Oct. 28 -- China needs to implement a plan to double national income in order to better develop its economy and support both its own and other economies, according to a new study.

To achieve those goals, China must also enlarge the ranks of its middle-income earners and continue to push down the Gini coefficient, The Paper said, citing the report published yesterday by Shanghai University of Finance and Economics. It also suggested that the country form the foundation for sustainable economic growth and boost domestic demand.

Urban and rural income growth has slowed in recent years. National per capita disposable income after adjusting for inflation rose just 0.6 percent in the first three quarters of this year because of the Covid-19 pandemic, and the next step in boosting domestic demand faces bottlenecks, the report said.

China still has problems in income distribution, and the middle-income population is proportionally small, the report said. China’s poorest citizens -- 20 percent of the population -- account for just 4.7 percent of income or consumption, while the richest -- also 20 percent of the population -- account for as much as half.

Households are still snapping up homes against the backdrop of a sluggish macro economy caused by the coronavirus. That is reflected in rising household debt in the second and third quarters, the report noted. Medium- and long-term household loans rose by CNY1.8 trillion (USD268.2 billion) in the third quarter, the highest for any third quarter in years, indicating a recovery in the real estate market.

While household debt continues to build up, the increase in household savings has slowed. According to the report, savings jumped by CNY1.62 trillion in the third quarter, down from CNY1.71 trillion in the same period last year, and less than the second-quarter’s CNY1.86 trillion. It was the first time that the third-quarter figure was lower than for the second quarter.

Given the difference between the increment in loans and deposits, Chinese households are more willing to invest in real estate with poor liquidity but high returns though the coronavirus impact is not over yet.

The report concluded that with Covid-19 continuing to spread globally and China’s economy still not fully recovered, the country’s large household debt will weaken household cash flows and may act as a constraint on boosting the domestic economy.

Editor: Peter Thomas