China Issues 35-Point Plan To Tackle Income Inequality

China’s ruling State Council on Tuesday released sweeping policy reforms towards its income distribution mechanisms, reported Xinhua, in the hopes of narrowing the nation’s widening wealth gap, amid growing public discontent.

China’s ruling State Council on Tuesday released sweeping policy reforms towards its income distribution mechanisms, reported Xinhua, in the hopes of narrowing the nation’s widening wealth gap, amid growing public discontent.

According to Bloomberg, the 35-point blueprint had been under development for years and was due to be released at the end of 2012, but an internal dispute led by state-owned businesses and banks had delayed a consensus in December; whilst China is also in the midst of completing a once-in-a-decade power transfer.

[quote]“It’s a good plan that came a little bit late,” said Yuan Gangming, a researcher with the government’s Chinese Academy of Social Sciences in Beijing, to Bloomberg. “The income gap in China is so big now that it brings huge risks of derailing China from its growth path.”[/quote]

“Something needs to be done about it,” Yuan added.

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As part of its guidelines, the government aims to double the average real income of urban and rural residents by 2020 – from the 2010 level – by boosting minimum wages, loosening controls on lending and deposit rates and increasing spending on education and affordable housing.

The State Council’s new guidelines also called for state-owned companies to hand over an additional 5 percent of their profits to the government by 2015, while personal income tax would also be adjusted to capture more income from the rich.

[quote]“There are some stark problems in income distribution that need urgent solving,” said the plan, as issued on the central government’s Web site. “Chiefly, there remain quite large disparities in urban-rural development and incomes, income allocation is poorly ordered, and there are quite serious problems with invisible and unlawful sources of income.”[/quote]

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“We need to strictly enforce rules on accurate reporting of income, property and investment by all levels of officials,” it added, claiming that the state will step up efforts to track and control illegal income, including those received by government officials.

For the first time since 2000, China’s National Bureau of Statistics (NBS) publicly revealed the nation’s official Gini coefficient, which measures the level of economic inequality in a society, last month – a moderate 0.474, higher than the warning level of 0.4 set by the United Nations. According to the China Digital Times however, other, non-state controlled, surveys have found China’s gini coefficient to be at a more alarming level of 0.61.

Wang Xiaolu, a senior fellow at the National Economic Research Institute of the China Reform Foundation, told Caixin Online that rampant corruption meant officially produced figures for income inequality could not be trusted.

[quote]“How reliable are they (the government figures)? Well, the NBS has China’s largest pool of data on urban and rural residents, and I believe its methodology, based on simple random sampling, is fine…. But the main problem is the NBS’ data on urban residents. It is safe to say that the high-income bracket has been hugely underestimated and the sampling does not reflect the reality of current income distribution.”[/quote]

Read: China’s Income Distribution Plan on China.org.cn