Income gaps have to be closed: News analysis

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Last updated at: (Beijing Time) Wednesday, February 25, 2004

Income gaps have to be closed: News analysis

Once you drive north out of Chengdu, capital of Southwest China's Sichuan Province, the landscape becomes increasingly inhospitable... the income disparity is evident not only between urban and rural residents, but also among urban people as well.

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Once you drive north out of Chengdu, capital of Southwest China's Sichuan Province, the landscape becomes increasingly inhospitable.

Here is the town of Huoju, some 400 kilometres from the provincial capital. Home to poverty-stricken farmers for centuries, it now has a population of 40,000.

Most residents eke out a living planting rice and vegetables. Besides, they can make extra money working 12 hours a day carving stones at a nearby quarry for the town's building sites.

Ju Hua, a 60-year-old villager, says his five-member family was fortunate to make a net income of about 3,000 yuan (US$360) last year.

Poverty, a big challenge

"But others are not so lucky. It is especially hopeless for families whose members have contracted incurable diseases," says Ju.

The poverty that haunts Ju, his fellow villagers and their peers across the country poses a great challenge for the country's development.

Ever since the nation began opening to the outside world in the late 1970s, coastal provinces such as Guangdong, Zhejiang, and Fujian have reaped the lion's share of wealth thanks to their natural advantages.

But nine interior provinces and autonomous regions, plus the vast rural areas under the jurisdiction of Chongqing Municipality, have remained appallingly poor.

This poverty belt, stretching from Yunnan in the south to Xinjiang in the north, makes up more than half of China's land mass and is home to 285 million people -- a population bigger than that of the United States.

Despite China's energetic efforts to harmonize development between its prosperous east coast and the poverty-stricken interior provinces, coastal areas continue to suck up as much as 70 per cent of the new investment pouring into the country. As a result, the gap between the two -- whether measured by income or share in GDP and exports -- is expected to widen in the next few years.

In addition, the income gap among Chinese urbanites continued to widen in the first nine months of last year, triggering fresh worries about a potential wealth polarization in the fast-developing economy.

The National Bureau of Statistics (NBS) announced a steady rise in disposable income for urbanites, with per capita income up 9.5 per cent over the previous year to 6,347 yuan (US$767.47) between January and September 2003.

But the survey suggested that per capita income of top earners, who account for 20 per cent of the urban population, posted a year-on-year increase of 12.4 per cent to reach 13,120 yuan (US$1,586) in contrast to low-income urban residents, who also make up 20 per cent of the urbanites, whose earnings edged up by 8.3 per cent to 2,433 yuan (US$294.19).

Income disparity

Li Shi, an economist with the Chinese Academy of Social Sciences, says the income disparity is evident not only between urban and rural residents, but also among urban people as well.

He says the data highlights the yawning wealth gap between the rich and the poor in China, which could be a destabilizing factor for society threatening sustainable economic growth.

An earlier report by Li's academy warned that income disparities would grow further unless the government introduced urgent measures to tackle the problem.

The study found that the Gini coefficient -- an international measurement of income disparity -- among Chinese urban residents had risen to 0.32 from only 0.16 in 1978; while the figure among rural residents reached 0.35 in 2000, compared with 0.21 in 1978.

The figure for urban and rural residents jumped from 0.389 in 1995 to 0.417 in 2000, above the international danger level of 0.4.

A zero Gini coefficient represents perfect equality and 1 indicates a complete monopoly of wealth by the privileged.

Official surveys indicate that the most wealthy people in China include newly-rich private entrepreneurs and entertainment stars.

Meanwhile, the underprivileged group consists of jobless and laid-off urbanites and poor farmers.

Li Shi says soaring unemployment, caused by sweeping industrial restructuring and reform of State-owned enterprises, contributed to the growing income gap in cities.

To head off a crisis, the government has launched a massive campaign to redress this imbalance and bring the west out of its economic backwardness.

Starting 2000, the country launched a massive campaign to develop the western regions. It devised preferential lending and investment policies in a bid to pull in hesitant foreign investors.

The government has also been providing massive subsidies for some of the nearly 28 million people living in poverty.

Despite that, it is still a big challenge to close the wealth gap; and China's new leadership has lost no time in proclaiming its intention to address the issue.

Premier Wen Jiabao said China's economy had developed at a rapid pace in recent years, but that too much of the growth was concentrated in the coastal areas. "The whole economy would benefit if prosperity was spread to interior regions," said Wen.

Balanced development

To achieve the goal, Li Yining, president of Peking University's Guanghua School of Management, says that the balanced development of China's rural and urban areas should be speeded up.

He says that the Third Plenary Session of the 16th Chinese Communist Party Central Committee has provided guidelines to close the rural-urban and industrial-agricultural gaps that have long existed in China.

Promoting co-ordinated development between the rural and urban areas will help raise farmers' income and push forward all-round social progress, he notes.

China's rural areas, which are home to the majority of its population, have long lagged behind the urban areas in terms of social and economic development.

Li calls for more efforts to develop the non-government sector of the economy to help spur agricultural industrialization and the construction of small- and medium-sized cities and towns.

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