Analysing Chinese Grey Income: New study, new findings

- Almost Rmb10 tn in hidden income, or 30% of GDP. "Based on a creative survey technique focusing on the correlation between income and spending patterns, and with over 4,000 samples across 19 provinces in China, Prof. Wang estimates that the per-capita disposable income of urban Chinese households in 2008 should be Rmb32,154, 90% above the official data. Total hidden income could total Rmb9.3 tn, 30% of GDP, with about 63% of hidden income in the hands of the top 10% of urban households."
- The potential of China’s consumer market is even bigger than we expected. "Most investors are aware that Chinese income statistics are underestimated, but the exact amount is subject to much speculation. The size of grey income revealed by Prof. Wang is striking and could help investors to understand the rationale of the Chinese government’s recent strong push for faster wage growth and a more equitable income distribution pattern – which would also help boost overall consumption."
- Big ticket items are the biggest beneficiary. "While we think that the Chinese government will try to reduce this huge income disparity problem and the size of the grey income, this is not likely to change significantly in the near future. Chinese property, European luxury goods, high-end retailing and Macao gaming could be the biggest beneficiaries of the current income distribution pattern. In particular, we think BMW, Galaxy, Hang Lung Properties, Mengniu, Swatch and Vanke will benefit most."

CreditSuisse Expert Insights 20100806

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