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China Strives to Narrow Yawning Income Gap for Social Equality


By Rong Jiaojiao, China Features

A black Mercedes-Benz sedan stopped by the gleaming Plaza 66, a five-story chrome-and-glass emporium of high-end brands in downtown Shanghai. Michael Yan, 46, board chairman of a local real estate company, stepped out and strolled amid Gucci, Prada and Versace inside the mall, hunting for valuable items that match his position of an annual income of over one million yuan (US$ 125,000).

Across the street from Plaza 66, Zhang Simin was also hunting for valuable items, digging in a dustbin for discarded plastic bottles to sell for money.

"In the past, everybody had almost the same income, so life was about the same for everybody," observed the 38-year-old farmer from Southwest China's Sichuan Province. "Nowadays, however, some people are getting increasingly richer while people like me still lead a hard life." Zhang, who went to this leading metropolis and economic hub of China four years ago, had tried to make a living as a construction worker and vegetable vendor, but ended up in collecting recyclable garbage for a meager 600 yuan (US$ 75) per month.

Gone are those days when egalitarianism prevailed during the Chairman Mao era more than three decades ago. China has been experiencing rapid transitions since Deng Xiaoping launched reforms in 1978 to turn a planned economy into a market-oriented one and an agricultural society into an urban, industrialized one. The country's GDP (gross domestic product) has been growing by over nine percent a year on average, leading to a near quadrupling of per capita income, according to the National Bureau of Statistics.

However, the "letting a few people and regions get rich first" policy seemed to have so far failed to result in the originally-designed "common prosperity", while a growing income gulf is emerging between urban and rural residents, between different regions, and even between urban residents employed in different sectors. China has become home to the rich dads and poor dads, luxury villas and migrant shacks.

The Gini coefficient, a key gauge of income disparity in which zero indicates complete equality while one indicates complete inequality, reached 0.45 in China in 2004, which has passed the internationally recognized danger level of 0.4, as against Japan's 0.25, Europe's 0.32, and India's 0.33, according to the United Nations 2005 Human Development Report.

The report also shows the poorest 20 percent of China's population take home only 4.7 percent of total income or consumption while the top 20 percent account for 50 percent of total income or consumption.

"China's economic reform must not turn shared poverty into uneven wealth. All Chinese citizens should benefit from the reform," said Chinese President Hu Jintao at a meeting discussing equal income distribution this May.

Hu said that the Chinese authorities have put the establishment of a more fair and equal income distribution system compatible with a market economy on top of its agenda, so as to guarantee equal competition for all of society.

Starting July 1, 2006, the central government plans to spend 34.7 billion yuan (US$4.3 billion) on increasing the income of the low-paid and expanding the size of the middle class while wiping out illegitimate incomes and putting a curb on excessively high salaries.

A total of 120 million people, including six million central and local government officials, 30 million employees from public institutions, 50 million retired veterans and government employees, are expected to benefit from the pay rise. In addition, the stipend standards for 30 million disabled army servicemen, family members of martyrs of the communist revolution and servicemen, and the basic subsistence allowances for urban dwellers will also be raised.

In China, the income of civil servants of the same rank varies between regions since it depends heavily on the state of local government finances. A recent article by the Study Times, a publication of the Party School of the Central Committee of the ruling Communist Party of China (CPC), indicates a nearly seven-to-one gap between the highest and lowest earners among the country's more than five million civil servants with a per-capita average of 15,487 yuan (US$1,936) a year after the eighth pay rise for civil servants in 2003, although already a major decrease from a 10-to-one gap in 1985.

Therefore, according to the plan, the income for civil servants working in underdeveloped areas will be increased from 2006 while a ceiling is expected to be set and strictly implemented for those working in prosperous regions, to close the gap in salaries for civil servants of the same rank. This is also stipulated in the Civil Servants Law coming into force on January 1, 2006.

"It (the reform of the civil servants' payment system) will help create a sound environment for income distribution system reform of the entire society," said President Hu in a recent speech in Beijing.

Indeed, China's economy is two different tales with booming development for the increasingly urbanized coastal part of the nation and relatively stagnant economic conditions in the rural central and western portions.

A survey conducted by the Economic Research Institute of the Chinese Academy of Social Sciences shows that the average per capita income of urban residents -- 10,493 yuan (US$1,312) -- was 3.2 times that of farmers -- 3,255 yuan (US$407) -- in 2005, a further increase from 2.8 times in 1995.

"We must not leave the rural population of some 745 million outside the dynamic economic development drive. Prosperity should be shared by all social members who have contributed a lot to the reform," said Fan Gang, director of the National Economic Research Institute.

Also, he noted, those unlawful means to gain personal wealth, including exploitation of policy, systematic, and administrative loopholes, tax evasion and pursuit of "gray incomes" by government officials through power abuse, should be strictly prohibited. "It is urgent to make all income transparent and balanced," he said.

Yang Yiyong, deputy director of the Economic Research Institute of the National Development Reform Commission, holds that to form a sound income distribution system will take time. "A country cannot avoid seeing widening income disparity during its early stages of shifting to a market economy given the difference in a person's ability, family conditions and place of birth," he said.

However, "the inequalities caused by social policies, resulting in people's unequal opportunities in receiving education, health insurance, and chances of migration, without doubt, should be avoided. Otherwise, it will lead to high unemployment, social unrest and imbalanced investment and consumption."

In 2006, a "new socialist countryside" program was unveiled by the Chinese authorities, which focuses on providing increased support for farmers together with improved education and health care for the rural population. China will spend an extra 5.2 billion yuan (US$650 million) on rural schools, hospitals, crop subsidies and other programs, raising spending on those areas by 15 percent, Premier Wen Jiabao told the annual legislative session of the National People's Congress earlier this year.

"These policies are part of the new policy initiatives in the 11th five-year development program, aimed at building a harmonious society proposed by President Hu Jintao. It means an equal emphasis on economic growth and social equality and justice," said Yang Yiyong.


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