Income Distribution And Financial Structure: An Evidence From China And The United States (1978-2007)

Income distribution play an very important role in the development of the financial structure. From the perspective of income distribution, this paper argues the economic factors on the development of the financial structure. Focusing on the theme of "income distribution and financial structure", using physical transactions and financial transactions accounts of Flow of Funds Accounts from China and the United States, the paper respectively examines income distribution and financial structure of China and the United States, especially the structure of financial assets by vertically and horizontally comparative analysis. To identify the income source that leads to the financial structure differences of Sino-US, the paper further links income distribution and financial structures by Flow of Funds Accounts from China and the United States.This study shows that the reason why the structure of financial assets in China is single mainly because the source of income for people in China is very single, and China's financial structure is not fully developed, primarily because the proportion of disposable income for people in China is very low and declines.Therefore, the paper highlights several priorities for income distribution and financial structure in China. The first is to significantly improve the share of disposable income, to improve the share for the compensation of employees in that of the national income initial distribution and to increase property income for residents. The second is to reform the tax system to reduce the tax burden on residents. The third is to increase government social benefits to persons. The fourth is to relax the control on corporate welfare expenditure. Meanwhile, China's financial institutions should carry out product innovation according to Chinese people's income structure, which of source income is relative single and not relatively stable, and design financial products available for Chinese residents by developing contractual pension funds and fostering institutional investors, and reduce financial investment threshold so that residents also share the benefits of financial development to increase the diversity of property income.