'Grey income' darkens the economic future

Leaders must face up to the issue of "grey income", which concerns almost every area of the government's reform and the country's future, said an article of the 21st Century Business Herald (excerpts below).

A report examining urban residential income by Wang Xiaolu, a researcher with China Reform Foundation, concludes that "grey income" in 2011 was about 6.2 trillion yuan ($985 billion), 12 percent of GDP that year.

"Grey income" refers to illegal income that cannot yet be verified under current institutional framework. The report found the richer the family the more "grey income" sources they had.

The nature of "grey income" is the possession of resources. Public resources are traded on social connections, rather than through the rules of the market. The increase in "grey income" after 2009 was partially caused by loose monetary and financial policies.

Most "grey income" concentrates in the investment-dominated production and transaction links.

"Grey income" also comes from the trade section of the administrative approval process. Private and public capital is embezzled by individuals in the form of non-market transaction costs. That is where the civil servants seek financial gain from their office.