China's "gray" economy: what about the handjobs?

Danwei

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Busted at the hair salon

Sohu.com reports on a new study finding that urban residents in China enjoy 4.4 trillion renminbi in "gray" income. "Gray income" includes any income that is (a) illegal, (b) "the rational merit of which is called into question by generally accepted societal moral concepts," and (c) other income the source of which is unclear.

According to the study, called "The Condition of National Income Distribution and Gray Income," "gray" income goes hand-in-hand with wealth. The report identifies the following contributing factors to "gray" income: a lack of regulatory control over investment capital, poor transparency of investment capital flows, and "serious abuses and leaks." The report points out that, in recent years, investment in real estate projects with multiple layers of sub-contracts have created opportunities for "leakage." The problem, concludes Wang Xiaoyu, who headed the group that prepared the study, is not "marketization, but the institutions that foster corruption."

It's not surprising that the study found "gray" income to be a problem of China's affluent class, given its methodology. The study's authors surveyed more than 2,000 residents across China from different class backgrounds. The survey results were then compared to data collected by the National Bureau of Statistics (NBS). The difference between the per capita disposable income levels reported in the survey and those recorded by NBS was identified as "gray" income. But NBS admits that ferreting out the actual income of high-income residents is a "headache problem," and 70% of high-income residents who participated in the survey said they are unwilling to disclose their true income situation to NBS.

Maybe the income of rich Chinese includes a greater proportion of "gray" income than their poorer countrymen, or maybe the disparity is an accounting phantom that vanishes in daylight. What the light of day exposes in your correspondent's hutong is vigorous participation by the laobaixing in China's "gray" economy, from the hair salon-***-handjob shack down the street, to the "adult health" sex shop one alley over, to the gambling establishment across from the community center. And while reporting on corruption-related "gray" income may advance an important political agenda, denying the existence of the seedier "gray" economy — the one dominated by China's poorer folk — makes no sense. After all, the true size and robustness of China's economy can never be reflected in data that fails to count the handjobs.

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