Govt has to narrow the wealth gap

An increasing number of young people fear being left on the wrong side of the divide as China's wealth gap continues to widen and the competition for well-paying jobs intensifies.

Wang Wenjuan, who recently majored in Chinese, has just paid off 20,000 yuan ($3,214) in student loans. And to make ends meet, the 26-year-old works as a part-time writer and tutor apart from her full time job in a publishing company.

"My dream is to become a famous writer, that's why I chose Chinese as my major," says Wang, who comes from a small village in Gansu province. "I can earn about 80,000 yuan a year if I work very hard. But it is expensive to live in Beijing and my family needs help. I have no hope of saving any money."

The Ministry of Human Resources and Social Security's 2011 Salary Report shows the growth in people's income has seriously lagged behind the growth in national GDP and fiscal revenue. While the government's treasury increased by 20.4 percent from 2003 to 2011, people's average income growth was 13.7 percent.

China's overall economic growth over the past three decades has been excellent, but it has been accompanied by a widening wealth gap.

China is one of the most unequal societies in terms of wealth distribution. China's Gini coefficient - a widely accepted measure of income inequality - is alarmingly high. While the United Nations says anything above 0.44 should send alarm bells ringing, a recent Southwestern University of Finance and Economics survey shows China's household Gini coefficient was 0.61 in 2010.

That the income gap is indeed a cause for concern is borne out by a statement of Ma Jiantang, the head of the National Bureau of Statistics. On Jan 24, 2012, Ma said NBS hasn't published any Gini coefficient figure for the country since 2000 because it knows that its data on high-income earners are inaccurate and therefore working out a figure would be impossible.

The leaders of the Communist Party of China have made it clear that creating a more equitable society is one of their top priorities. But this will not be an easy task because it would mean implementing difficult reforms, eradicating corruption and eliminating vested interests.

In the work report presented to the 18th Party Congress, President Hu Jintao said: "We should improve the way in which income is distributed, protect lawful income, increase the income of low-income groups, adjust excessively high income and prohibit illicit income."

The National Development and Reform Commission, China's top economic planning body, has reportedly finalized the draft of the General Plan for Income Distribution Regime Reform, which means it will now solicit the opinions of ministry level and other senior officials.

The plan, however, has been delayed again until at least March 2013, indicating how difficult the reform process is.

The reform draft covers 10 areas, which are residents' income vis-a-vis national income, normal income growth rate, minimum wages, State-owned capital budget, revenue distribution scheme, mechanism to ensure all people share the fruits generated by public resources, tax adjustment for high-income individuals, compensation for State-owned enterprises and financial institution managements, public employees' allowances and performance bonus for public institution employees.

Although the draft conveys the aims of the central government to make income distribution more equitable, vested interests are expected to try and derail the process because it will have a negative impact on them.

The NDRC began the reform process in 2004, but since then it has twice deferred submitting a document to China's cabinet, first in early 2010 and then in late 2011. This indicates the extent to which vested interests have become entrenched in the economic planning process over the years.

The most urgent tasks now are to establish a fairer income distribution system and market environment that would curtail the abnormally high income growth of monopoly enterprises, reform the hukou (household registration) system that is discriminatory against rural residents, expedite the urbanization process so that more people have access to quality public services, and pass better laws to eliminate sources of gray income.

As Xi Jinping, leader of the ruling party, said on Nov 15, people want more income and greater social security. They also want their children to have good jobs and lead a better life. Meeting these goals is "our mission", Xi said. So the government has no option but to narrow the wealth gap and defend social fairness and justice.