SPECIAL ISSUE： DISTRIBUTION OF NATIONAL INCOME IN A TRANSITIONAL ECONOMY Who is the predator, who the prey？ --an analysis of changes in the state of China＇s national income distribution

This paper investigates how national income distribution among the corporate, government, and household sectors has changed from 1992 to 2005 using the Flow of Funds Accounts adjusted after the National Economic Census 2004. We analyze the changes in institutional distribution of national income from the primary and secondary distribution of national income, with a focus on explaining the fall in the household sector＇s share of the national income pie since 1996. To analyze the primary distribution of national income among institutional sectors, we formulate the share of each sector in primary national income as the weighted average of the product of factor income share using each sector＇s proportion of the different types of factor income as weights. With this formula, we adjust factor income shares in the Flow of Funds Account, re-compute the distribution of disposable income by institutional sector from 1993 to 2005, and extrapolate the distribution to 2006 and 2007. Our findings are： the share of the household sector in national disposable income reached its peak in 1996, and declined by over twelve percentage points between 1996 and 2005, of which 10.71 and 2.01 percentage points were due to primary distribution and secondary distribution respectively. In contrast, the share of the corporate and government sectors in primary distribution increased by 7.49 and 3.21 percentage points respectively. In secondary distribution, the share of the government sector further increased by 3.17 percentage points, at the expense of the other two sectors. We also find that the decline in the share of labor income and property income in factor income distribution are the two main sources for the decline in the household share of primary distribution. In the period 2005-2007, the household share of national income fell further by over three percentage points, mostly resulting from the increase in the share of net production tax.

Understanding High Saving Rate in China

This paper presents a detailed analysis of the Chinese saving rate based on the flow offunds data. It finds that the most widely adopted view of precautionary saving, which is regarded as the top reason for maintaining a high saving rate in China, is misleading because this conclusion is drawn from the household survey data. In fact, the household saving rate has declined dramatically since the mid-1990s, as is observed from the flow of funds framework. The high national saving rate is attributed to the increasing shares of both government and corporation disposable incomes. Insufficient consumption demand is caused by the persistent decrease in percentage share of household to national disposable income. Governmentdirected income redistribution urgently needs to be improved to accelerate consumption, which in turn would make the Chinese economy less investment-led and help to reduce the current account surplus.

Why Has China's Current Account Balance Converged after the Global Financial Crisis?

China's current account surplus declined significantly from its peak of nearly 10 percentof GDP in 2007 to less than 1 percent in 2018.The new pattern offered fresh evidencefor our understanding of China's current account dynamics.In this paper,we used flowof funds data to gauge its underlying driving forces.Specifically,by employing indexdecomposition analysis,we decomposed the current account from the perspective ofsavings and investment into three sectors:the household,corporate,and governmentsectors.We found that the decline in China's current account ratio was first driven bycyclical factors,i.e.weak corporate saving growth induced by the economic slump in2009 as well as the following massive corporate investment bolstered by the governmentstimulus plan.However,such cyclical factors quickly subsided,and the subsequentcurrent account balance reduction was later supported by structural factors,i.e.household savings declined enduringly and the Chinese government switched to a moreexpansionary fiscal policy.There are three possible explanations for the structuralmovement:reduced precautionary saving due to higher social security coverage ratio,lower corporate profits as a result of economic slowdown,and a twin deficit due to thegovernment's more relaxed fiscal stance.The new facts,however,were not consistent withother current account theories focusing on long-term aspects of the saving-investmentaccount puzzle,especially those relating to China's special demographic characteristics.