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According to the Social Blue Book 2005, compiled by the Chinese Academy of Social Sciences, the income gap between people from different social groups is widening.
The average per-capita disposable income of the top 10 per cent on the rich list is more than eight times that of the bottom 10 per cent. And the total wealth of the top 10 per cent accounts for half of the total wealth owned by urban and rural residents, while that of the poorest 10 per cent amounts for only 1 per cent.
A recent online survey initiated by www.zaobao.com suggests that 75.9 per cent of those who responded are worried about the widening income gap in China, and 68.2 per cent of them believe that the gap will grow wider.
Should the income gap be closed? The following are disparate answers from some leading economists.
Fan Gang, a senior economist, says reform and development are often accompanied by relative poverty. China is currently undergoing a series of reforms whose major objective is to eliminate absolute equalitarianism, so a widening income gap is inevitable.
Some foreigners have rebuked China for its ever-widening gap between rich and poor, but obviously they are not fully taking China's reform into consideration. In the coming five to 10 years, China will witness a growing income gap and this will not stop growing for 20 or 30 years.
A moderate expansion of the income gap is acceptable, while too big a gap should be narrowed with public policy adjustments.
Most of those averse to an income gap increase suggest it is largely due to corruption. It may be true that if corruption was eliminated, the income gap will be narrowed but it will still be inevitable during a reform and development period.
We have to take measures to slow down the pace of this widening gap in China, like imposing an inheritance tax and adopting a progressive taxation rate. When the rich are paying more tax can the government help the poor.
Li Jiange, vice-president of the Development Research Centre of the State Council, has another view.
He says that since the reform and opening policy was introduced, China's regional income gap has not been enlarged, but narrowed. Take East China's Zhejiang Province for example. In the past, local people refused to venture outside their own provinces to make money because they could not earn very much. But now they are rushing to other provinces, even to those in the west.
Common prosperity is achieved through economic development, but not equal income distribution. Only when the cake is made bigger can everyone get a bigger piece. A workable income distribution policy will help the majority, including some from the lower rungs of the social ladder, enjoy a substantial income increase.
As China's economy profits more and more from foreign and private enterprises, we are supposed to be tolerant towards a widening income gap, mainly caused by differing returns on capital and technological innovation. If the income gap is closed, capital accumulation and the development of the private sector will not be achieved.
Policy-makers should focus on fighting illegal income while assisting low-income groups. In addition, they should encourage people to get rich through honest labour and lawful business.
If the public concentrates too much on the current income gap, China's economic development will be greatly reduced.
Lin Yifu, director of the China Centre for Economic Research at Peking University, says an income increase and improved income distribution could be realized at the same time if each region develops by emphasizing their comparative advantages.
China is a developing country, and there is an obvious income gap between city dwellers and those in the countryside. Farmers cannot expect to live a rich life if they are confined to their small patches of land, and their situation will further deteriorate if the population of farmers swells. In this regard, more people should be encouraged to take non-farming jobs.
When farmers are transformed from producers in the countryside into consumers in the city, the income of farmers still working in the fields will see a significant increase. To achieve this, urban industrialization should be accelerated. For example, eastern China has attracted a great number of job-hunting farmers because urban industrialization is well under way there.
The income gap between urban and rural areas will be with us for some time. Without such a gap, farmers will not bother to travel to the cities. The gap will not be easily closed by government policies. Long-term economic development, which lightens the burden on farmers and increases job opportunities, will help close the gap.
Tang Min, chief economist with the Chinese branch of the Asian Development Bank, has this to say on the subject:
To solve existing problems in China's income distribution, education has to be placed on top of the government agenda. The government should step up its pace in promoting free elementary education or compulsory education nationwide.
It should provide cures for problems that the market fails to solve, such as unequal opportunities in education and medical treatment. If these problems are not answered with radical solutions, problems associated with the income gap will increase.
Gao Xiaoyong, chief economist with the International Herald Leader newspaper, says the income gap is widening as China transforms from a planned economy to a market economy. This rewards the capable with bonuses while discourages the less talented with less pay. During the transitional period, a widening income gap is a natural result of the introduction of the market system.
If, as some complain, the income gap has been caused mainly by corruption, it would have been impossible to achieve the current level of economic development.
Of course, the income gap needs to be reduced by tinkering with the market system.
(China Daily March 15, 2005)
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