Mon, May 10, 2010
Business > Economy

China's poverty gap close to 'red line'

2010-05-10 09:25:08 GMT2010-05-10 17:25:08 (Beijing Time)  Global Times

The gap between the rich and poor among the areas, industries and groups in China is escalating and the Gini index of the country now exceeds the "red line". These series of problems brought by the escalating poverty gap have drawn concern from the public.

Chang Xiuze, an expert at the Academy of Macroeconomic Research (AMR) of the National Development and Reform Commission (NDRC), said that according to the figures from the World Bank, China's Gini Index reaches 0.47.

"China's Gini index has seen consecutive rises after it exceeded the international warning line of 0.4 10 years ago, and the country's poverty gap has broken the limit line," he added.

According to Su Hainan, director of the Institute for Labor and Wages Studies of the Ministry of Human Resources and Social Security (MOHRSS), currently, the incomes of urban residents are 3.3 times those of the rural residents, while it is at most, 2 times in the international community.

Also, the incomes among different industries are in large difference, the incomes of the employees in industries with highest salaries are 15 times higher than those in lowest-salary industries.

The senior managers in the listed State-owned enterprises (SOEs) see their incomes 18 times higher than the incomes of their employees, and on average, the senior managers' incomes are 128 times higher than the average wage in the whole country.

Li Shi, director of the Income Distribution and Poverty Research Center at Beijing Normal University, said that the income gap between the top wealthiest 10 percent people and the 10 percent poorest people has risen to 23 times in 2007 from 7.3 times in 1988.

Analysts believe that with China's economic development in the recent years, factors like production of the land, resources and capital play an important role in the income distribution. The industries of property, minerals and securities can bring exorbitant profits in a short time, and therefore a few people were enriched.

According to the 2009 Forbes list, the property developers consist of 154 of the 400 wealthiest people. Of the top 40, 19 are property developers, and of the top 10, five are property developers. Wealth in China is mainly centralized on the real estate industry.

Many experts also insisted that the fiery capital market, especially speculative investment, enlarges the gap between the capital income, labor income, and business income and makes "the rich richer and the poor poorer."

Wei Jie, professor from the Tsinghua University, said that for a long time, this phenomenon of "rights-decide-the-wages" occurs in China's income distribution, which means that the incomes are not decided by capability, ingenuity and diligence, but by the identities and industries you are in.

For instance, working for monopolized industries like energy, telecom, oil, finance and tobacco, as well as being a civil servant, can render you a higher salary, position or welfare, according to him.

According to the figures from the MOHRSS, the employees of the industries above-mentioned see their salaries two to three times higher than those of other industries, and if welfare was included, the gap would be larger.

Also, the country has, in recent years, witnessed a situation in which thousands of graduates compete for a position of civil servant. Experts believe that this method of distribution should be adjusted to balance the income gap between different work positions.

In addition, according to local media, the existence of "off-the-book" incomes also contributes to the gap.

According to a research by Wang Xiaolu, vice director of the National Economic Research Institute (NERI) in 2007, there is at least 4 trillion yuan of irregular "off-the-books" in China every year.

Some analysts believe that the workers' total incomes only account for one third of the total incomes of the country, and that the government can only monitor those "white incomes" leaving a large amount of money unchecked.

Currently, incomes of the whole country are divided into five categories: "white incomes", "black incomes", "gray incomes", "bloody incomes" and "golden incomes".

The "white incomes" refer to normal salaries and welfare, and "black incomes" are illegal incomes through improper ways (bribery, robbery and drug trafficking). "Bloody incomes" are those obtained through the disgrace and sacrifice of others, and the "golden incomes" are the incomes from capitals (gold, stocks and futures).

The term of "gray incomes" is a mixture of white and black incomes in which, sometimes, money is obtained through legal channels but without supervision from the government.

A survey done by Wang also showed that the incomes that are not included in the statistics reached as high as 4.8 trillion yuan, and incomes from the 10 percent wealthiest people make up three fourths of the amount. Some analysts said that another factor enlarging the large gap is the corruption.

"Although society is more tolerant towards the gap, if we do not curb this trend, the result will be worse," said Yang Yiyong, director of the Social Development Research Department at NDRC.

According to the analysts, the country needs to start the reform of the distribution system if it intends to keep it below the "red line".

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