Mao Zhenhua (Co-Director of the Institute of Economic Research at Renmin University of China, Professor, Doctoral Supervisor): The fundamental reason for the significant structural divergence in the current macroeconomy is the misalignment between household income growth and economic expansion. In recent years, I have consistently emphasized analyzing macroeconomic performance through price indicators, as prices are the most direct and sensitive metrics reflecting economic operations and underlying issues. In the first quarter of 2026, China's macroeconomic operations showed positive momentum, particularly with price indicators beginning to stabilize and rebound. Notably, the Producer Price Index (PPI) turned positive year-on-year for the month, ending a streak of 41 consecutive months of negative growth. I believe that sustaining this trend of price stabilization and recovery requires coordinated efforts across both short-term and long-term horizons. To consolidate and expand the positive momentum of the first-quarter price rebound, short-term macroeconomic policies must, while absorbing externally-driven price effects, resolutely maintain a robust expansion of aggregate demand. In the long run, China's economy urgently needs structural reforms in deeper distribution mechanisms to establish a sustainable mechanism for stable growth in household income. This is essential to break the bottlenecks in the supply-demand cycle, activate endogenous domestic demand, and solidify the institutional foundation for long-term, high-quality economic development.
The misalignment between household income growth and economic expansion is the root cause of the significant structural divergence in the current macroeconomy, and the unique characteristics of high-tech industry development are exacerbating this phenomenon. China's current economic growth presents a "two-speed" landscape. On one hand, high-tech industries are expanding rapidly, with exports frequently delivering bright spots. On the other hand, a large number of small and medium-sized enterprises (SMEs) and traditional industries at the economic periphery continue to face significant difficulties due to insufficient effective demand. This phenomenon essentially stems from a structural misalignment between the growth of the national economic aggregate and the growth of actual income for the general populace, and the development of high-tech industries is further widening this gap. Taking the United States as an example, the rise of tech giants has dominated economic growth but has also led to extreme wealth concentration among a minority of capital and top-tier talent. Currently, China is showing similar signs during its technological development. The prosperity of high-tech industries has generated超额收益 (excess returns) for early-stage capital and a small number of practitioners, but this growth dividend has not been widely shared with ordinary workers. This may lead to a divergence of interests between capital and labor, and between high-tech workers and ordinary workers, ultimately constraining the sustained expansion of effective demand. Therefore, we need to address the structural issues in national income distribution through long-term institutional design, allowing more people to share in the fruits of economic development.
Stabilizing employment is the prerequisite for stabilizing income, especially for safeguarding the jobs of middle- and low-income earners. To ensure a stable rise in macro-level labor remuneration across society, the primary prerequisite is to stabilize workers' employment positions, particularly the fundamental employment base for middle- and low-income groups such as migrant workers and new university graduates. Currently, micro-level labor protection systems and judicial practices, while protecting workers' rights, also objectively increase corporate compliance costs and potential dispute risks, leading some enterprises to adopt a defensive mindset of "being hesitant to hire." This requires a careful examination of the balance point within labor employment systems and labor laws, ensuring the protection of workers' rights while avoiding excessive constraints on normal corporate hiring practices.
Deepen structural reforms in the fiscal, taxation, and distribution systems, implementing differentiated policies for different income strata. For high-income groups, tax regulation should be strengthened, tax laws strictly enforced, and various preferential policies previously implemented by local governments for executives and business owners should be reviewed to ensure that high-income earners bear a tax burden commensurate with their income. For low-income groups, more precise policy tools need to be researched, such as appropriately reducing institutional costs for enterprises hiring new labor and stabilizing job subsidies, to encourage enterprises to expand employment. Only through a package of structural institutional arrangements that balance fairness and efficiency, thoroughly打通 (unblocking) the micro-level channels for national wealth to flow to middle- and low-income strata, can China's economy truly overcome the trap of insufficient effective demand and move towards a higher level of equilibrium.
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