According to a report from China Youth Daily, experts strongly support income distribution system reform to promote social equity.

On May 26th, the Politburo of the Central Committee of the Communist Party of China held a special meeting on the reform of the income distribution system and the regulation of the distribution order. The most effective way to narrow the gap is to expand social security coverage, contain inequity caused by monopolies and use tax revenue to adjust income distribution.

Tang Jun, a research fellow at the Social Policy Research Center of the Chinese Academy of Social Sciences said any of these measures would have an important impact on society because it is the right time to solve this problem.

High time social equity is addressed

People's livelihood and social equity have been big issues in recent years. This is because the gap between the rich and the poor is increasing so quickly. According to international standards, China's Gini Coefficient was 0.16 at the end of the 1970s, which means most Chinese people earned about the same amount, but by the end of 1990s, China's Gini Coefficient had reached 0.40, meaning the income gap between the rich and the poor had widened and wealth was concentrated in the hands of a minority. This has caused some instability in society.

Professor Wu Zhongmin from the Central Party School of the CPC said that the income distribution gap is now so big that the issue must be addressed.

"Currently 80 percent of the Chinese population earns a low to mid-range income and middle income earners only account for 15 percent of the population, which means Chinese people don't have much purchasing power. This is very dangerous because it is important for China to rely on domestic demand."

Wu Zhongmin said domestic consumption has fallen to the lowest level since reform and opening up in 1978 while China's dependence on export and investment reached its highest level.

According to research by the scholars at the Party School in Spring 2006, China's current Gini Coefficient could reach 0.46, creating even further income disparity.

Li Yonghai, a member of the Chinese People's Political Consultative Conference has found the top 10 percent income earners receive a wage 8.8 times higher than those in the bottom 10 percent.

This income distribution is not very healthy; the middle class should be the largest group with a small number of high and low income earners.

Narrowing the gap between the rich and the poor has become a social consensus

The big gap between the rich and the poor has caused security and stability problems in China. The rebellion in Guangdong province in south China has a great deal to do with the big gap between the rich and the poor.

The current situation is not good. Unemployment, corruption, social inequity, income disparity and the gap between rural and urban citizens, are all issues that badly need to be resolved.

Monopoly industries contribute to the uneven distribution of wealth

Gao Shusheng, a research fellow at China's Insurance and Social Security Research Center at Peking University said some monopolized industries contributed to uneven income distribution.

"Some institutions or companies such as banking, power and transport set their own stipends, subsidies and other welfare which are all outside the official salary. Their income is obviously much higher than other sectors."

Gao Shusheng said beginning with economic reform in 1978, the distribution system reform aimed at breaking the 'iron rice bowl' and the equal income system to stimulate people's enthusiasm at work and improve efficiency. Owing to the rapid pace of development the income gap has arisen and increased quickly.

Gao thinks if the first stage of income disparity is accepted as an unavoidable cost or price of social development, then there will be more and more complaints from the public.

Tang Jun said workers in the power sector may have free electricity and those in the transport sector travel free too. The five large commercial banks charge people service fees if the customer gets information from a different bank despite protests.

China's input in social guarantee is comparatively lower than some poor African countries

Wu Zhongmin said China's social security system has not yet been established. Without a social security guarantee, people don't like to spend any money. That's why people's savings are amassing so quickly. People have to save money for their future and dare not spend.

CPPCC committee member Li Yonghai said in particular, laid-off workers and farmers who have lost their land will become "real proletarians" when they enter middle or old age. Poverty will come to this group of people quickly.

On the other hand, China's tax revenue still comes from middle or lower income earners while those who have higher income don't pay enough tax. Wu Zhongmin said this is also due to lack of standards or rules for different sectors. Without fixed rules, policy will favor the strongest sectors.

Late Chinese leader Deng Xiaoping warned that the aim of the socialism is to make all the people rich, but not to create a gap between the rich and the poor. "If our policy leads to a bigger gap, then we have failed," Deng said. Although some people argue that we haven't reached that point, the gap is indeed getting bigger and bigger.

"One can say that the government didn't pay enough attention to Deng Xiaoping's second strategic idea which aimed to have all Chinese richer by the end of the 20th century, " said Wu Zhongmin. Wu Zhingmin maintains that there is nothing wrong with insisting on economic reform, but the government must face the problem from a social perspective too.

"Reforming social security, compulsory education, public health and housing will be a great challenge as previous reforms were not successful."

Wu Zhongmin said that comparatively speaking, China's input in social livelihood from its GDP is the lowest in the world. It is not only much lower than in developed countries, but also lower than in some poor African countries.

The government should shoulder its responsibilities in distribution reform

Li Yonghai said the government should shoulder its responsibilities in distribution reform. "In fact, the drastic increase in cost of social security, medical expenses and education fees have caused the big gap between the rich and the poor. Lower income families are suffering a lot from paying all these fees," said Li.

Wu Zhongmin also emphasized that if the government didn't support establishing social security system, reforming tax policy and creating various relevant systems, it will be hard for reform to succeed. In fact, if the government spent only 10 percent of its fiscal revenue of 3 trillion Yuan last year, it would be able to establish a preliminary social security system.

So far, the high income of those sectors that have a monopoly has been somewhat supported by local governments. The local government wants more revenue from local companies so they intervene more.

CPPCC member Sun Jiye said the distribution issue is also related to equity and efficiency. If the equity and efficiency issue is not resolved, it will affect healthy economic and social development. To improve equity and efficiency, there is a need to adjust policy and provide more supervision and management in monopolized sectors such as power, oil, railway, aviation and telecommunication. A monopolized profit distribution system should be established and this part of profits should be submitted to the government.

Tang Jun said that to realize the goal of building a wealthy and healthy society in an all round way in 2020, the government has to adjust its social policy and make new laws for the interests of different parties. It is imperative now to readjust the distribution system to ensure healthy development in China.

By People's Daily Online