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New plan to reduce income inequality

By Lan Lan (China Daily)

13:51, May 23, 2012

A new income-distribution framework is set for approval to redress the growing gap between rich and poor, government officials said.

The framework comes at a time when the most affluent 10 percent of the population make 23 times more than the poorest 10 percent.

In 1988 it was seven times.

The framework, eight years in the making, has been tabled for approval by the State Council and is likely to be introduced in the second half of this year.

"If low-income families cannot afford a decent standard of living, rich families will not enjoy any sense of security. That is a problem for the world, not just China," Yang Yiyong, director of the Social Development Research Institute under the National Development and Reform Commission, said in an interview with China Daily.

Yang has been closely involved in the framework's planning. Its overarching guideline, he said, is "for the government to give up a little tax revenue, for companies to give up a little profit and for rich people to give up a little interest."

Tax revenue grew from 7.3 trillion yuan ($1.12 trillion) in 2010 to nearly 9 trillion yuan in 2011, a 22.6 percent increase. It greatly outpaced urban income growth, 8.4 percent, and rural income growth, 11.4 percent.

Per capita income in China has just exceeded $4,000.

As part of income-distribution reform, government agencies, at both central and local levels, will be urged to pass legislation to cut taxes and regulate executive pay in high-profit monopoly industries and private companies, Yang said.

The framework will see an enlarged middle-income group and high earners will pay more in tax.

It is time for common prosperity, Yang declared, although one government plan is not going to provide all the answers to the thorny issue of income distribution in a society of 1.3 billion people.

This is not just about individual tastes or lifestyle, economists point out. It reflects a yawning gap between rich and poor that is hindering the world's second-largest economy from making further progress and perhaps eroding its very social fabric, Yang said.

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