Increasing people's income entails systemic efforts

Editor's note: One of the tasks outlined at the Central Economic Work Conference was formulating and executing plans to raise the incomes of urban and rural residents. China Business Journal spoke to Zhang Xiaojing, director of the National Institution for Finance and Development, on how these plans will be realized. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

People's income and their expectations for the future directly determine their willingness to consume. Sustained growth in household income therefore provides the most fundamental and durable underpinning for stimulating consumption and expanding domestic demand.

However, subsidies, promotional campaigns or expansionary stimulus measures often produce only short-term rebounds in consumption. When income growth is weak or income expectations are unstable, households tend to be cautious in their spending behavior. Consumption that is not backed by solid income support may undermine the internal resilience and sustainability of the domestic cycle. By contrast, measures such as stabilizing employment and raising labor remuneration can fundamentally enhance households' purchasing power and thus their willingness to spend.

An increase in consumption stimulates demand in both the service and manufacturing sectors, improves business performance and creates more employment opportunities.

Implementing the plans to increase incomes for both urban and rural residents is a systematic project that requires coordinated and well-aligned policy efforts.

The primary task of increasing income is to stabilize and expand employment. Industrial policies should guide the development of labor-intensive industries, the development of the service sector and new forms of manufacturing. Policies to stabilize and expand employment should transition from temporary, emergency-style support to more normalized arrangements.

Coordination between income distribution and wage policies is equally important. Institutional arrangements are needed to raise the share of labor remuneration in primary distribution. The mechanisms for setting minimum wage levels and wage guidelines should be refined to encourage enterprises to reasonably increase incomes for frontline workers and skilled personnel. At the same time, the mechanisms linking skills development with returns must be strengthened through vocational education, skills training and incentives for technical workers, ensuring that higher productivity and greater skills translate into higher earnings. For workers in new forms of employment, income protection and distribution rules should be improved to prevent excessive income volatility from eroding consumption capacity.

Fiscal and social security policies also play a critical role in income growth, serving both efficiency and equity objectives. Through tax and fee reductions, improved special deductions and more targeted transfer payments, the burden of necessary household expenditures can be eased, effectively increasing disposable income. Meanwhile, a more robust social security system and social safety net can reduce uncertainty surrounding long-term expenses such as healthcare, eldercare and education, enabling income gains to translate more fully into actual consumption.

Financial resources should likewise align with the objective of increasing household income, while maintaining prudent risk control. Financial resources need to be guided toward inclusive finance, supporting small and micro businesses as well as individual entrepreneurs in expanding their operating income. The regulated development of multitiered capital markets and long-term wealth management products can provide residents with relatively stable channels for asset allocation, contributing to sustainable growth in property income.

Income growth policies must also be coordinated with regional development strategies and new urbanization efforts. Through equalization of public services, integrated infrastructure development and more efficient mobility of factors of production, income disparities between urban and rural areas as well as among regions can be narrowed.

In particular, greater support should be directed toward less-developed areas through industrial relocation, public investment and targeted fiscal assistance, strengthening their endogenous development capacity and preventing income gains from becoming overly concentrated among a limited number of regions or groups.