Wealth Gap Issue and Countermeasures in China
Name: Niu ChuanBiao Student ID: S08480
Research paper supervisor:Dr.Sekou Conde
the college of History and Culture Minzu University of China
2008-2009 Academic Year
Abstract：Wealth gap issue is an important economic and social focal problem in our present society. Many scholars pay more attention to this issue. There is no doubt that the current situation of China’s wealth gap is of urgency. And it is the result of a combination of factors, such as difficulties in economic development, deficiencies in public policy, social system structure in economic reform, and knowledge gap among different regions. etc. The wealth gap issue can not only prove a drag on our economic development, result in faith and psychological crisis, but also trigger social unrest. Effective measures should be taken to resolve the problem. Thus government should coordinate regional economic development, vigorously develop national education, and promote re-employment and the reform of taxation policy and distribution policy, establish mature social welfare and social security system. Only in these ways can we narrow the expanding income gap.
Key words: China; wealth gap; government; countermeasures
Introduction
With the development of our economy and society, wealth gap issue has emerged. The problem has aroused a widespread concern in Chinese society. Someone think that wealth gap in china is not big enough at present. While the vast majority of people argument that the current situation of China’s wealth gap is in a severe state. In my view, there is no doubt that the current situation of China’s wealth gap is of urgency. Not only can we find the expanding gap in different areas, such as between urban and rural areas, between the eastern and western regions, but also can find gaps among industries, occupations. Specifically, it is the result of a combination of factors, such as difficulties in economic development, deficiencies in public policy, social system structure in economic reform, and knowledge gap among different regions. etc. Government should not ignore this issue, and as well as all Chinese people. Because the wealth gap issue can not only prove a drag on our economic development, result in faith and psychological crisis, but also trigger social unrest. So some effective measures should be taken to resolve the problem. Specifically, we should coordinate regional economic development, vigorously develop national education, and promote re-employment and the reform of taxation policy and distribution policy, establish mature social welfare and social security system. Only in these ways can we narrow the expanding income gap.
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The current situation of China's expanding gap between the rich and the poor
Wealth gap issue is an important economic and social focal problem in our present society. Many scholars pay more attention to this issue. Someone think that wealth gap in china is not big enough at present. “To achieve the objectives of the reform, we must be sacrificed one generation, including 30 million older workers, more than 800 million farmers and laid-off workers.” [1] While the vast majority of people argument that the current situation of China’s wealth gap is in a severe state. Yao JingYuan, an expert of National Bureau of Statistics, estimated that China’s urban-rural income gap has reached up to about 6 times. And this is only “the name of difference”. [2] In my view, the expanding wealth gap issue in China can not be ignored. The current situation is of urgency.
1) Widening income gap between urban and rural residents
As a result of different policy-oriented, infrastructures and ideas, the income gap between urban and rural areas has been expanding increasingly since 1978. According to the data from our National Bureau of Statistics, the proportion of urban residents’ per capita income to rural residents’ was only 1.71 in1978, whereas in 2003 it became 3.23.[3] In 2004 there was 12 million urban people living a relatively poor life , whose per capita annual income only has 1059 yuan . What is worse, there was 26.1 million poverty-stricken population in rural, with the pre capita income less than 668 yuan. Once the standard turns to 669—924 yuan, the number of the low-income population will be increased to 49.77 million. [4] In addition, according to the statistics from Zhong Wei, a professor in BeiJing Normal University, 50 million farmers’ hard-earned money of a year can be only equivalent to 50 magnates’ assets in mainland. If we only consider the monetary income, the current income gap between urban and rural areas will be expanded to 4 times. And if we take the citizens’ social welfare into account , the actual urban-rural income gap will be further expanded to 6 times. Under such circumstances, China will be the country with the largest income gap between the rich and the poor in the world. [5]
2) the Uncoordinated Development of Different Region and Gaps
During more than two decades of China’s reform and opening up, the central government gave a series of preferential policies to Eastern and coastal areas, which provided varieties of good opportunity to accelerate their economic development. Quite the opposite, western provinces can only serve as the raw material base for the eastern parts, which not only consume the limited resources of their own, but also sacrifice its’ environment. From 1980 to 2003, the proportion of the western part’s per capita gross domestic product to the eastern part’s has enlarged from 1:1.92 to 1:2.59. Meanwhile, the central part’s to the eastern part’s turned out to be 1:1.53 to 1:2.03. [6] According to the data from our National Bureau of Statistics, Shanghai, Zhejiang and Guangdong in the eastern part were the first three provinces with rather higher per capita income, up to 13475.88yuan, while the per capita income of Ningxia, Guizhou and Gansu provinces in the west was only 6550.73yuan or so. In terms of the per capita income of rural residents in different parts, the absolute gap between the eastern and western areas can be expanded to2239yuan. [7] In addition, according to “China Human Development Report”, published by United Nations Development Program (UNDP), the western region’s development indicator is only 76% of the eastern region’s.[8] Specifically, these gaps mainly lies in infrastructures, living environment, traffic conditions, and so on.
3) Wealth Gap among Industries, Occupations
As a result of the absence of the real market economy, there are a large number of monopolistic industries and enterprises with more power of monopolizing production and operation resources and less market competitiveness, like China Mobile, Sinopec, state-owned commercial banks, railway, etc. The average wage level of workers in these industries is higher than that of other industries. Compared with monetary income in 1978 and 1985, in 2002 the absolute gap between senior industries and junior industries was 27.8 times higher than that in 1978 and 20.2 times higher than that in1985, as well as the relative gap.[9] Another example is the Management Buyouts problem (MBO). Some people view it as “the third dividing up of the state-owned assets”. This phenomenon can not only result in a huge loss of state-owned assets but also bring about the unfair distribution of wealth between the management and workers in state-owned enterprises, further exacerbating the existing income distribution gap.[10] Take a large state-owned coal mining enterprises for example, the annual salary of management cadres can be up to more than 1000,000 yuan, which is 20 times higher than that of workers in production line.[11] Not only can this phenomenon bring about detrimental effects upon the steady development of enterprise but also trigger our social stability.
4) Gini Coefficient Over the International “Yellow Light” Warning Line
Gini coefficient is the important index used internationally to measure the gap between the rich and the poor, meaning the ratio of the uneven distribution of income and total income. According to an investigation of Chinese Academy of Social Sciences, the Gini coefficient in China stood at 0.47 in 2005, compared with 0.2 in 1978 and 0.375 in 1996. It was much greater than the international “yellow light” warning level of 0.4, meaning that the Chinese society has entered “a zone of income distribution inequity.” [12] However, a relative person from National Bureau of Statistics said: “We should recognize Gini Coefficient objectively , especially pulsing a national discount. Judging from the current situation , not merely urban residents’ Gini Coefficient but also rural residents’ is less than 0.4%. And that’s why it can not trigger social unrest.”[13] But from my standpoint, it seems to be unreasonable to add a label to the Gini Coefficient. The fact that Gini Coefficient of urban and rural areas are both less than 0.4% simply states that wealth gap between urban and [...]
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