China Urged to Heed Enlarging Income Disparity

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Last updated at: (Beijing Time) Thursday, August 15, 2002

China Urged to Heed Enlarging Income Disparity

China must figure out effective ways to counteract the inequity of income distribution. The core problem is to create more jobs for low-income family members and make them be able to share the benefit coming with China's rapid economic growth.

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China must figure out effective ways to counteract the inequity of income distribution, according to a research report by the Economics Institute under the Chinese Academy of Social Sciences, a government think tank.

Although low-income families find their living conditions better-off continuously, the pace is by far slower if compared with the richer.

The core problem is to create more jobs for low-income family members and make them be able to share the benefit coming with China's rapid economic growth, the report said.

To date, the Gini coefficient - a key gauge of income disparities - in China has reached 0.39, closely next to the recognized danger level of 0.40.

Two reasons have mainly brought about the ever-enlarging income gap in present China, according to the report.

The first one is the income disparities between different areas and industries.

Urbanites and those working in government monopolistic sectors, for example telecommunication and banking, generally earn much more than farmers and city dwellers in non-monopolistic industries.

The other is the employment discrimination against different social identities.

In China today, seldom can farmers gain an equal footing while competing with their urban counterparts in job-seeking. Such discrimination also further pushes farmers to a disadvantageous corner while they try to elevate themselves through other means, for instance education and vocational training.

Correspondingly, the report offers two remedies.

First, the central government must speed up the process of industrialization and urbanization, which will fundamentally erase the inequalities due to different economic development levels between rural and urban areas.

Second, demolish the monopolistic hedges of some industries and lift the discriminative measures attached to different social identities.

The first specific step should be to gradually cancel the existing household registration system, which has in fact differentiated two completely different social identities between farmers and urbanites and has served as the basis of discriminations against the former.

Another key step is to ensure that farmers can share the same rights in education and vocational training as their city counterparts. What farmers actually lack sometimes are not opportunities but the capacity to grasp them.

The report suggests building up a more sensitive taxation network to oversee the tax evasion by corporations and upstart individuals.

As a matter of fact, tax authorities has already moved to tighten the net for tax dodgers.

Late last month, Chinese film actress Liu Xiaoqing - popularly referred as the richest woman in China - was arrested for the alleged tax evasion.

Analysts consider this a signal of the Chinese Government's efforts to soften the social dissatisfaction of the worsening inequity of income distribution.

The report also advises the central government to employ a tougher fist against corruption.

Quick money funneled through corruption is the most salient factor eroding the basis of a fair market mechanism, according to the report.

By PD Online staff Forest Lee

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