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The government took 21.1 percent of the disposable income of the country in 2001 and 24.2 percent in 2006. Business income grew to 17.5 percent in 2006 from 15.1 percent in 2001 and residents' income dropped to 56.5 percent in 2006 from 63.8 percent in 2001.

When the government has more money, it will inevitably be motivated to make more investment through various channels. The increasing business income would also stimulate businesses to put more money into enlarging their factories.

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In the last two centuries, most market economies have proven that unreasonable income distribution brings a production capability surplus.

China has also seen such a surplus. With the help of free trade, exports have diverted part of China's production capability into overseas markets, but the troubles caused by production capability surplus may surface sooner or later in China.

Such a scenario might be devastating to some industries or some regions. To guard against it, there must be reform to policies on income distribution. Once investment and consumption are on par, the economy can move forward with fewer obstacles.

The primary target in reforming income distribution is to eliminate factors retarding the free flow of productive elements, like capital and labor.

The authorities should facilitate rural residents to get equal opportunities in employment and education like their urban counterparts. When productive elements are free to flow according to market forces, the income difference between urban and rural populations, different parts of the country and different businesses would be reduced.

Another important step for the government to take is to collect taxes on the exploration of mineral resources, land, and use of other State assets.

Businesses, State-owned or private, should pay a license fee to the State to get their hands on State property and then pay taxes for their usage. State-owned enterprises should also give dividends to the government from their profits.

The money would flow from businesses to the government, and reduce the investment impulse of businesses and boost the State coffer as well. The government should also put more money into the public service and social security system.