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Commentary: Income distribution reform

By Wu Yixue  (China Daily)

08:23, October 23, 2012

It is essential to increase social fairness and justice and boost demand by narrowing the ever-widening wealth gap

Wednesday's State Council meeting chaired by Premier Wen Jiabao was confirmation of recent reports that China is to press ahead with its long-awaited income distribution reform. While laying out near-term economic work plans, the State Council meeting has transmitted the message that "an overall program on income distribution reform is set to be drafted in the fourth quarter".

This means China's marathon effort to draft such a program, which the National Development and Reform Commission has been working on since 2004, is drawing to a close.

The program, if completed as announced, will fulfill Wen's commitment to finish the task before the end of his second term next March. In this year's Government Work Report delivered to the annual session of the National People's Congress in early March, Wen vowed to enhance the rational income distribution system as it is an "important manifestation of social fairness and justice" and a major way to boost domestic demand and narrow the country's income gaps. In an article published in Qiushi, or Seeking Truth, an official magazine of the Communist Party of China, later in March, Wen once again stressed greater efforts are needed to build a rational income distribution structure.

According to the Blue Paper on Social Management, published by the Chinese Academy of Social Sciences in mid-September, the gap between the rich and poor is continuing to widen and systematic risks are on the increase. The paper warned that the widening gap between rich and poor is approaching the "line of social tolerance" and it is a potential public crisis if no changes are made.

China is now among the countries with the most serious income disparity. China's Gini coefficient - a commonly used measurement of wealth inequality - is now very high, although no official figure has been published for a decade. The last time the National Bureau of Statistics published China's Gini coefficient in 2001, it was 0.412. In a report about the construction of China's all-round well-off society, published at the end of 2011, the NBS said China's Gini coefficient in 2010 was slightly higher than that in 2000, but it did not offer a specific figure. However, considering the hidden income that many high-income groups enjoy, the country's Gini coefficient will be even more than officially estimated.

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