China needs 'full-scale' reform to fight inequality

China's stated aim to narrow the income gulf between its sports-car driving elite and vast numbers who still live in poverty will need radical political and economic changes to work, say economists.

Long-delayed "proposals on the distribution of income" were announced this week ahead of Sunday's Lunar New Year, as hundreds of millions working in cities returned to their rural homes, many without running water or heating.

Beijing promised to improve the lives of these rural migrant workers, who are denied equal access to health, education and housing services in cities under a half-century old system of residency permits known as "hukou".

"Migrant workers from rural areas will be assisted to register as citizens and entitled to all basic public services in the cities," according to the measures quoted by the official Xinhua news agency.

But the aspirational document was generally short of concrete steps.

Tax reductions will be "promoted" for low- and middle-income earners, it said, and the government will "target" reducing the number of people living on less than $1 a day by around 80 million by 2015.

In 2011 Xinhua said 150 million Chinese live on less than that, a stark contrast to the country's image as the world's manufacturing heartland, the holder of its biggest foreign exchange reserves and a motor of global recovery.

The extent of inequality in China, particularly between urban and rural areas, saw authorities refuse to publish the country's Gini coefficient, a commonly used measure of inequality, for more than 10 years.

In December a research centre which operates under China's central bank said its Gini coefficient stood at 0.61, one of the highest in the world. A Gini figure of zero represents perfect equality of income and 1 total inequality.

Last month China's government said the figure was 0.47, higher than the United States, and above the 0.4 figure widely cited as a "danger level" for social discontent.

Research centre director Gan Li questioned the official statistic, arguing that the government "has not published the percentage of people who refused to answer" and "the richer they are, the more likely they are to refuse to answer".

Like other economists, Gan believes the authorities underestimate the incomes of the wealthy, who hide a significant portion of their earnings.

China has seen an explosion in its luxury goods market -- which grew 56 percent last year -- as Western makers of products from designer handbags to yachts and supercars pile in.

The boom casts doubt on government statistics saying the top 10 percent of earners had an average annual income of 59,000 yuan ($9,500) in 2011, economist Wang Xiaolu said recently in Caijing, a respected economics journal.

"Solving the income distribution issue requires full-scale reform," he wrote on his blog.

Aware of the growing resentment against the rich and endemic corruption, the Communist Party is urging officials to be frugal, pledging strict controls on government spending on banquets, car purchases and overseas travel.

But many observers say that fundamental tax reforms are essential to create more equal income distribution.

China should introduce a national property tax and inheritance tax, economist Hu Xingdou of the Beijing Institute of Technology told AFP.

The government plan said only that property tax, which some cities have been experimenting with, will be extended, and inheritance tax will be introduced "at the appropriate time".

Local governments derive much of their income from land sales, leading to many farmers being evicted from their land and compensated below market rates.

The newly released plan says that farmers will be "guaranteed proceeds" from land sales, but Hu called for greater changes to China's system of property rights, where all land is officially owned by the state or rural collectives.

"Farmers should be able to develop or sell their land, which is their collective property," he said.

Mao Yushi, a guru of economic liberalisation in China, called for reforms to the financial system, where firms with close connections to the state receive the vast majority of bank loans, leaving small-business owners short of capital.

"The princelings can go to the bank and get money just on the strength of their status and get rich on this basis," he said, referring to the children of members of the communist elite.

"The two-tier society of rich and poor is everywhere. The distinctive characteristic of China is people who have special powers and bully others."

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • ‘Get SAF 44 killers before BBL passage’
    ‘Get SAF 44 killers before BBL passage’

    Lawmakers are demanding the arrest of the Moro Islamic Liberation Front (MILF) fighters involved in the killing of 44 policemen in Mamasapano before the approval of the proposed Bangsamoro Basic Law (BBL) in Congress. Cagayan de Oro Rep. Rufus Rodriguez, chairman of the 75-member ad hoc committee in the House of Representatives deliberating on the BBL, prodded the Department of Justice (DOJ) to speed up its investigation and file charges against the MILF guerrillas as the Aquino administration …

  • Pinoys dance for Earth Hour
    Pinoys dance for Earth Hour

    The Philippines once again displayed its support Saturday night for the worldwide observance of Earth Hour by hosting a dance party after turning the lights off from 8:30 to 9:30 p.m. to save energy and make a statement on various environmental issues. The World Wide Fund for Nature (WWF) said widespread participation proved anew that no individual action on climate change is too small and that no collective vision is too big with celebrations in over 7,000 hubs in 170 countries. The WWF said …

  • Phl offers Sabah to win Malaysia’s support for UN case vs China
    Phl offers Sabah to win Malaysia’s support for UN case vs China

    The Philippines has offered to downgrade its claim on Sabah in exchange for Malaysia’s support for its case against China before the United Nations. The quid pro quo was contained in a note verbale the Department of Foreign Affairs (DFA) handed to a representative of the Malaysian embassy last week, a week after the visit of Malaysian Defense Minister Dato  Seri Hishammuddin Tun Hussein. The note verbale, a copy of which was obtained by VERA Files, referred to the May 6, 2009 joint submission …

  • Maysak to enter Phl Wednesday
    Maysak to enter Phl Wednesday

    A typhoon with international name Maysak is expected to enter the Philippine area of responsibility (PAR) on Wednesday and bring rains over Northern Luzon by weekend, the state weather bureau said yesterday. Aldczar Aurelio, weather forecaster of the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), said the typhoon was 2,810 kilometers east of Mindanao as of 10 a.m. yesterday. “This typhoon is still too far to affect any part of the country,” the weather …

  • Nonviolent disciplining of kids pushed

    Child rights advocates called on senators to pass and strongly endorse a law that will institutionalize positive and nonviolent methods of disciplining children.The Child Rights Network (CRN), Plan International Philippines (PIP), Philippine Legislators’ Committee on Population and Development (PLPCD), and Lihok Pilipinas Foundation led the call for the enactment of the Positive Discipline Bill.Several Quezon City Council members led by Majority Floor Leader Jesus Manuel Suntay, Victor Ferrer …

  • Method to their madness

    [caption id="attachment_256768" align="alignright" width="212"] Illustration by Rod Cañalita[/caption] EMMANUEL PORTUGAL Country Manager for the Philippines, VMware I look after the garden. I’d like to think that I have a green thumb—no plants have died so far! The ones I like now that I planted a few months ago is the Blue Iris. Like the town in the movie, my Blue Iris shows up in the morning and only appears for one day. …

  • JGFP Summer Tour on today

    The summer tour for local junior golfers kicks off with the holding of the ICTSI-JGFP Baguio Junior Open today and tomorrow at the treacherous Baguio Country Club course in Baguio.Sixty players aged 6 to 17 years old are entered in the 36-hole tourney serving as the opening leg of the summer circuit organized by the Junior Golf Foundation of the Philippines with the International Container Terminal Services, Inc. Foundation as main sponsor. ... …

  • PH now market ready to absorb infra bonds

    The Philippine market is now ready to absorb infrastructure bonds that will be issued by private companies amid a growing pipeline of infra-related projects under the government’s Public-Private Partnership (PPP) program. President Benigno Aquino III last week said the government is still committed to spend more on the country’s infrastructure, with 16 PPP projects currently on the pipeline and nine that have already been awarded. Over the years, some of the country’s biggest infrastructure …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options