China's economic reform has entered a new phase in which changes to certain economic strongholds were required, according to Fan Hengshan, director of the Department of Economic System Reform of the National Development and Reform Commission.

As the wealth gap between different social groups widened, some of those who benefitted more from the current system are not willing to give up their advantages in the course of deepening economic reform. Given the gap in incomes between various regions and between some sections of society – and while continuing to emphasize efficiency – the goal of equality has been given a higher priority.

Fan said apart from pressing for equal employment opportunity to help bridge the gap in incomes, the government should also take some measures to regularize the income distribution systems, and seriously tackle problems of utilization of public authority, mobilization of public funds and monopoly by a small group of people who gain profits by relying on franchise. At the same time, the government must set up a complete individual income reporting system as well as strengthen the individual income tax collection system and supervision.

The Department of Economic System Reform of the NDRC issued a report on 5 February 2006 entitled "An overall analysis of income distribution of urban residents in China". This report said the current income gap among urban residents was too great and this gap at some point became unreasonable. On an overall basis, the Gini coefficient which reflects the entire income distribution of urban residents, has already reached the upper limit of what is reasonable, showing a value of plus or minus 0.4.[1] This does not include income received from employment other than one's regular job and extraordinary or one-off sources of income which are always difficult to estimate. If we include the latter, the actual Gini coefficient would be even a bit larger.

This report is based on the research report "National Social Survey of Urban Residents (Quanguo chengshi Jumin Zongheshehui diaocha) which was carried out by the Sociology Department of People's University of China with assistance from academic units in more than 20 cities in China in October 2004. In the survey more than 5,900 urban households were surveyed. The data from the survey revealed that the household income of those in the bottom 20 percent accounted for 2.75 percent of the total income of all households, and that this was equal to just 4.6 percent of the income of those in the top quintile.  Professor Li Yingsheng of the Sociology Department of People's University who took part in this survey said that as the Gini coefficient expanded, those in the lowest income group developed "a feeling of exploitation." Severe psychologically unbalanced feeling would lead to hatred of the wealthy and revenge and other behaviour which resulted in a series of social problems. At the same time, this could lead to a serious polarization of society, and an inability to realize fair competition and effective allocation of resources, which was detrimental to the healthy development of society.

Source: Xinhua News Agency (23 March 2006) 

7 April 2006

Footnote:

[1]The Gini coefficient (or Gini ratio) is a summary statistic and a measure of inequality in a population. The Gini coefficient ranges from a minimum value of zero, when all individuals are equal, to a theoretical maximum of one in an infinite population. It is usually used to measure income inequality but can be used to measure any form of uneven distribution.