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Hiding $2.34 Trillion in China

The Chinese hide as much as 14.7 trillion yuan [2.34 trillion US dollars] in income per year from the government's official numbers, deputy director of the National Economic Research Institute Wang Xiaolu reported [zh] during a recent talk at the Finance Museum.

China's grey income, or unreported income, came to 9.3 trillion yuan [1.49 trillion US dollars] in 2008 plus 5.4 trillion more[8.67 million US dollars] from the economic census, Wang said. The majority of the earnings is concentrated among the country's wealthy, widening the gap between rich and poor, he said.

The term “grey income” was coined in China after the country embraced capitalist reforms in 1978. The term describes off-the-books earnings, ranging from the payment a professor receives for giving a lecture outside the college to “hongbao” a doctor is given by a patient's family in hope of good treatment.

Wang defines “gray income” based on his own understanding and practical experience. He regards all the incomes that the NBS failed to take into account as invisible income, including gray income and some legal income that people don't want to disclose. Gray income accounts for a large part of the invisible income, because its sources are hardly made public.

Wang claimed grey income has its origins in the abuse of power and is closely connected with corruption.He even admitted that he himself has earned extra cash from the research fund.

In fact, the Chinese government attempted to crack down on unreported income in 2010 in order to reverse the widening income gap. However, finding “grey income” hard to define and facing the popular belief that the earnings weren't illegal, the effort fell flat.

The widespread existence of grey income has triggered criticism among the public. Netizens discussed [zh] the monetary phenomenon on popular Chinese microblogging site Sina Weibo.

One Weibo user “Baigu Lunjin” criticized [zh] off-the-books payments at school:

Wang Xiaolu pointed out the grey income is closely connected with corruption during Hexu interview. (A screen shot from youku)

Wang Xiaolu pointed out the grey income is closely connected with corruption during an interview. (A screen shot from youku)

摆古论今: 【拜金时代:一切成为商品】小学毕业班班主任将学生介绍给初中学校,得到灰色收入。初三班主任在初三上学期劝导差生提前流失,将学生介绍给中专学校,班主任获利。重点小学班主任对学生排座,照顾一名学生得500元。

[This is] money worshiping era: everything is commodity. If the teacher from primary school graduating class introduces students to a junior high school, she or he gets gray income. If the teacher from junior high school persuades the students who perform poorly to a secondary school, the teacher gets profit. When the teacher in primary school offers a better seat for a student, she gets 500 yuan [80 US dollars].

Another Weibo user from the entertainment industry pointed out [zh] TV hosts’ extra income:

北方猎手:【央视主持人灰色收入知多少?】央视主持人的工资成一直是人们关注的焦点。主持人的工资与工作年限、工作表现息息相关,而综艺节目主持人的收入往往高于新闻主播。但据央视内部人士透露,其实主播们基本不靠工资养家,灰色收入才是他们收入的主要来源。

How much do you know about the grey income of CCTV hosts? CCTV hosts’ wages have always been the focus of attention. A host's wage is closely related to his work experience and performance. However, the entertainment host's income is often higher than the news anchor. According to CCTV insiders, they don't rely on wages to support their families, as grey income is their main source of income.

Journalist Ding Rui quoted [zh] the director of the finance division within the ministry of finance:

记者丁锐:财政部专家:公车是领导和司机的灰色收入。 现在的公车,三分之一的时间用来干公事,三分之一的时间干领导的私事,剩下三分之一的时间干司机的私事。某种意义上讲,司机和首长都有灰色收入,国际经验一大套,但中国却始终解决不了这个问题。

Work-related cars are grey income of the leaders and their drivers. The work-related cars are now used for work for one-third of the time, another one-third of the time is used for officials’ private matters, and the remaining one-third of the time is used for the driver's affair. In a sense, the driver and the leader both have grey income, we have lots of international experience, but China can never solve this problem.

Even in academic and research world, grey income exists. Liang Kele commented [zh]:

 凉可乐:王小鲁和贾康今天在金融博物馆谈“灰色收入”,贾康直言,国家规定,科研单位里有工资收入的人是不能从课题费或专项基金里拿取一分钱 劳务的,但研究人员都会通过发票等形式报销以取得部分收入,就连曾专门研究灰色收入的王小鲁也不得不承认自己这么做过。

[Experts] Wang Xiaolu and Jia Kang talked about “grey income” in the Finance Museum, Jia Kang mentioned that, according to state regulations, anyone who has a wage income is not allowed to get money from research funds, but researchers use invoice and other forms of reimbursement to obtain part of their income. Even Wang Xiaolu who specialized in grey income research has admitted that he had done that.

Grey income is also widespread within the medical industry. “Shiwan gongli zhihou” mentioned [zh]:

医生是“灰色收入”最丰厚的行业,拿红包、吃回扣和“走穴”,已经到司空见惯的地步。普通人日常看个病, 动个手术,给主刀医生、帮忙医生、麻醉师、手术室护士分别送红包,都是公开的秘密。在医院圈子里收红包是很普遍的事,谁敢说自己没有收受过?吃药品回扣是 医疗界“灰色收入”的另一种形式.

Medical is the most lucrative industry where the red envelope and kickbacks are the norm. Whether you go to see a doctor or have a surgery, you need to bribe the surgeon, the anesthesiologist and the nurses, it's an open secret. Receiving red envelope is a common practice, who can say that he has never accepted one? Drug kickbacks is another form of “grey income” in medical industry.

Since grey income and hidden rules seem to exist in every industry in China, how can it be prevented? Wang Xiaolu pointed out [zh] that the key lies in reform of the current system:

王小鲁:收入分配改革其实涉及方方面面,它不仅仅是调整工资,不仅仅是调整所得税,它可能还要包括改革政府管理体制,改革财税体制,改革土地管理制度等等一系列的问题,那如果说最突出,或者最迫切的问题是什么,我觉得首先解决腐败的问题,可能是腐败的问题是我们现在面临的最大的威胁。那么解决腐败问题,光是停留在反腐败上,说是发现了什么案子,出现了贪官,有一个我们再来抓一个恐怕不够。我们首先要解决制度上的问题,就是从制度上杜绝腐败产生的那些根源,我想这个是最关键的。

In fact, the reform of the income distribution involves many aspects, it is not just about wage adjustments or income tax adjustments, it may include a range of the reform of government management system, reform of fiscal and taxation system and reform of land management systems, etc. However, the most prominent and pressing issue is corruption, the biggest threat we are facing now. However, to solve the problem of corruption, we can't just stay with anti-corruption campaign by targeting one or two corrupted officials. We must first solve the problems in the system to eliminate corruption at the roots, this is the most critical.

 

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