MCLC: China proposes to narrow income gap

[Denton, Kirk]

MCLC LIST
From: kirk (denton.2 at osu.edu)
Subject: China proposes to narrow income gap
***********************************************************

Source: NYT 
(2/5/13):http://www.nytimes.com/2013/02/06/world/asia/china-issues-plan-to-
narrow-income-gap.html

China Issues Proposal to Narrow Income Gap
By CHRIS BUCKLEY

HONG KONG — The Chinese government issued a long-awaited plan on Tuesday
to narrow the gulf between rich and poor, offering broad vows to lift the
incomes of workers and farmers and choke off corrupt wealth but few
specific goals to rein in the nation’s wide inequality.

The proposal was mired for months in an internal dispute about whether to
aggressively scale back the rising salaries and benefits of some officials
working for state-owned businesses and banks. The document that emerged
from the discussions is filled with commitments to deal with that issue
and other sources of public concern about the gap between the incomes of
residents of dirt-poor villages and those living in privileged urban
enclaves.

“There are some stark problems in income distribution that need urgent
solving,” said the plan, which was issued on the central government’s Web
site. “Chiefly, there remain quite large disparities in urban-rural
development and incomes, income allocation is poorly ordered, and there
are quite serious problems with invisible and unlawful sources of income.”
The plan was drafted by the National Development and Reform Commission and
other central agencies.

The income distribution plan was an initiative promised by the departing
Chinese prime minister, Wen Jiabao, who leaves office in March. But it
also underscores the extent to which the new generation of leaders under
Xi Jinping has promised to expand state spending on health care, education
and social welfare.

Mr. Xi, who was appointed Communist Party chief in November and is set to
become state president in March, has said he wants to accelerate economic
changes in the spirit of Deng Xiaoping, who initiated market-based
liberalization from the late 1970s after decades of rule by Mao Zedong.

But in the process of introducing market forces in China, such changes
have starkly widened income disparities, and Mr. Xi has said that the
party must defuse widespread public dissatisfaction with poor public
services and, above all, corruption.

The income plan, however, does not offer specific new initiatives to
reduce corruption.

Beyond a general commitment to eliminate sources of illegal income, the
plan says that officials must abide by already announced rules to report
earnings and assets to superiors. Many experts, however, have said such
rules are ineffective without public disclosure as well.

The new plan also says that by the end of 2015 state-owned corporations
under central administration should increase the returns they pay the
government by five percentage points, with the additional payments to be
used for social welfare.

Average disposable annual income for Chinese urban residents in 2012 was
the equivalent of about $4,000, an increase of 9.6 percent after taking
inflation into account. Average rural net income was just under $1,300 per
person, a rise of 10.7 percent after adjusting for inflation, the Chinese
National Bureau of Statistics announced in January.

The bureau also said that in 2012 China’s Gini coefficient, a widely used
index of income inequality, was 0.474, slightly higher than levels of
inequality in the United States, where income disparity now stands as one
of the highest among advanced industrial nations. But some economists have
said China’s measure is actually much higher, when illicit and poorly
reported sources of wealth are taken into account.

“Deepening reform of the income distribution system is an extremely
arduous and complex task of systemic engineering,” the new plan says. “It
cannot be achieved in one step.”