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Income disparity heralds tough tests
2005-10-24
China Daily
China's national development blueprint for the next five years focuses on trying to balance out the income disparity, which is also high on the agenda at the Party's annual plenary session earlier this month.
The matter has drawn widespread attention from both home and abroad because the income disparity has reached such a dangerous level.
By any standard, whether one considers the United Nations Development Programme statistics or those issued by domestic researchers, we are facing a yawning income gap between the rich and poor that may continue to expand.
The Gini coefficient, a widely accepted measure of inequality in which zero expresses complete equality while one represents complete inequality, has exceeded 0.4 in China, the international benchmark for alarm.
All economic tools have limitations due to their specific methods, including the Gini coefficient. Although researchers are divided on how much the index can really reveal about China's situation, they agree that the crisis has become too serious for us to ignore.
The gap between income groups is not the only distribution problem China must tackle.
An income disparity also exists between the rural and urban regions. In 1985, the disposable income of each urban resident was about double that of a farmer's total income. By 2002, it had more than tripled.
The gulf between the affluent eastern regions and economically underdeveloped western provinces, and that between different sectors, is equally noteworthy.
Policy-makers are facing an uphill struggle as they battle to figure out a solution.
China has tackled the problem on all fronts. A proposed personal income tax reform is being examined by the legislature. The cut and ultimate scrapping of the rural agricultural tax in some provinces are certainly benefiting farmers. Funding has been made available and favourable policies drawn up to push the development of western and rust belt regions. Industrial monopolies are being broken and market competition is becoming more open. The social security network is covering more of the needy.
But more challenges lie ahead. Whether policy-makers can overcome them and present satisfactory answers to the people will put their political wisdom and management skills to the test.
Can the brakes be applied to the widening income gap between the rich and poor?
The proposed hike in the level of taxable income will ease the pressure, but other measures are needed. We are yet to establish an effective taxation system that will apply to all levels of income.
While policies have been implemented to cut the financial burden on rural residents, ideas for new sources of income for farmers are fast running out.
Worse, medical care and educational expenses have exhausted the savings of many farming families.
In recent years, many farmers have lost their land to property developers that often fail to provide adequate compensation.
A balance of power is urgently needed to ensure the rights and interests of farmers are respected when they deal with local political and commercial groups.
In the next five years, it is expected the central leadership will be able to demonstrate how effective it is in tackling these challenges and fulfilling political promises.
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