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New Gini figures show instability risks, need for reform

By Du Liya (Global Times)

08:13, September 17, 2012

The widening gap between rich and poor continues to pose a challenge to stability in China, with the latest figures showing that the Gini coefficient reached 0.438 in 2010, which exceeds UN warning levels.

The index, which represented the first local release of these figures in five years, was published by a Chinese NGO, the International Institute for Urban Development on Friday, as part of the Blue Book on China's Social Management.

The Gini coefficient, an index measuring inequality of income with a scale of zero to one (zero being totally equal and one being totally unequal), suggests that a country with a figure higher than 0.4 has dangerous levels of wealth inequality. According to reports in the Beijing News, the figure went from 0.275 in the 1980s to 0.438 at the end of 2010.

The report pointed out that the new index indicated that there have been risks of instability associated with the great achievements of the reform and opening-up policy, such as the increasing gap between the rich and poor and intensifying contradictions between government officials and the public.

"The widening gap will bring instability as the poor are eager to fight for equality. The index sends a warning to the government to pay attention to the large income disparity," Xia Xueluan, a sociological professor at Peking University told the Global Times.

No official statistics have been released by the National Bureau of Statistics since 2000. The bureau offered an explanation for this in a monitoring report in 2011, which said that the Gini index couldn't be calculated as the incomes of urban and rural residents are calculated separately.

A report released by the China Development Research Foundation in July said that the Gini index was 0.45 in 2001 and rose to 0.48 in 2007.

"In some developed countries such as the US, whose Gini index sometimes reaches 0.4, contradictions in income distribution are eased step by step through increasing taxation on the wealthy and improving the welfare system to help the poor," said Ding Yuanzhu, a professor at the Chinese Academy of Governance, adding that China could learn from them in some way.

Renowned economist Wu Jinglian told Caijing that the problems involving income distribution were caused by insufficient economic reforms. He said that the dissatisfaction of the public could serve as motivation for the government to step up efforts at reform.

In order to solve the problem completely, the government should move beyond the limitations imposed by special interests groups, and promote reforms to the market economy and the process of democratization, Wu added.

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