Income distribution reform an imminent task

16  January 2013

BEIJING – As China accumulates wealth during its rapid economic development, it is crucial to narrow the widening earnings gap through income distribution reform.

Narrowing the income gap and balancing the efficiency and the equity in development will be a major task for the ruling Communist Party of China (CPC), which will elect a new leadership this month at its national congress.

Last month, the State Council, or the Cabinet, decided to establish an overall income distribution plan by the end of the year, and observers have pinned high hopes on the upcoming 18th national congress of the CPC, which is scheduled to open on November 8.

According to officials close to the reform, the plan will focus on improving earnings for low-income groups and capping high wages by breaking up monopolies through opening up state sectors to private investors. It will also regulate the sectors by levying higher tax rates on state-owned enterprises.

China has been working on income distribution reform since 2004, but people’s expectations have not been met. State-run monopolized sectors have become a major target of public complaints.

An official report showed that some managers from state-owned enterprises earned thousands of times more than migrant workers last year, signifying widening incomes.

Thanks to three decades of rapid economic development, the incomes of Chinese people have witnessed significant growth and their living standards have improved. People feel and enjoy the bonus which economic development has brought.

However, the income gap is becoming ever wider along the road of development, as everyone in society can feel it. According to media reports, the number of China’s super rich ranks second in the world, only after the United States.

Unfair income distribution has been seen by many economists as a major obstacle in deepening the country’s economic reform and transformation of its mode of growth.

But more importantly, polarized population is not in line with the original goal of China’s reform and opening up, which is to achieve common prosperity, and is posing a threat to the country’s stability and the sustainability of development.

The widening income gap has resulted in increasing public complaints and sometimes social conflicts, and to some extent undermined the popularity of the government among the people.

China has successfully solved people’s food and clothing problems but there is still a long way to go in building a well-off society in an all-round way. Making more people share the fruits of economic development will be a crucial step toward that goal.