Current China's economy situation

China's GDP has started to slow down since the fourth quarter of 2009. Recently, China's official statistics agency announced that China's GDP grew 7.5% in the second quarter of 2013 while industrial production and fixed asset investment continued to dip. The figures declined comparing to 7.7% growth rate from January to March in 2013.

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There are several reasons for China's cooling economy. Firstly, there has been a sharp decline in industrial production growth. It dipped to 8.9% year-over-year in June 2013. Secondly, China's fictitious economy is developing prosperously. Fictitious economy contrasts with real economy. The market value of fictitious capital assets varies according to the expected return or yield of those assets in the future, which is at best only indirectly related to the growth of real production. If a large amount of capital is centralized to fictitious economy market, there will be difficult to raise capital for real economy industry.

Urbanization in China

Urbanization is one of the important methods of modernization construction in China. After Chinese villagers become urban residents, the country will reinvest hugely in production tools, production sites and residential areas. Every percentage China's urbanization rate increases, the total investments will increase by 2 trillion yuan. In 2005, China had 286 cities. Most of China's cities have a population of one million and below. Shanghai is the largest city in China, with a population of 19 million, followed by Beijing with a population of 17.4 million. These are the two mega-cities in China. From 2010 to 2025, it is estimated that 300 million Chinese now living in rural areas will move into cities. The fast pace of urbanization will create at least 1 trillion yuan in annual investment opportunities in building water supply, waste treatment, heating and other public utilities in the cities.

China's income distribution reform

Chinese government is engaged in reform the country's income distribution mechanisms, a long-awaited move amid growing public concern over a widening wealth gap. The reform focuses on how to increase residents' income, narrow the income distribution disparity and regulate the distribution order.

According to China's latest income distribution reform plan, the percentage of profits that central state-owned enterprises have to hand in to the government will be increased by around 5 percentage points by 2015 from the current level and part of the added income will go to social security. State-owned enterprises must impose ceilings on payments to their senior management who are appointed by the state and make sure senior staff's salary growth is slower than the average level for general employees. Authorities will strictly control both the total amount of salaries and the average salary level at state-owned enterprises in sectors with excessively high income to gradually narrow the income gap between different sectors. China expert suggests wage gap should be controlled within 40 times between high-income earners and low-income earners