Premier Wen Pledges to Narrow Income Gap

The year 2011 marks the beginning of China's 12th five-year plan, a government initiative to review the national economic and social development and set up new objectives in a five-year cycle. As the country's wealth gap widens in recent years and rises up as a critical concern amid its rapid economic growth, Chinese Premier Wen Jiabao has attached more significance to improving people's well being and readjusting income distribution in the new half-decade blueprint.

CRI's Zhao Kun reports at the Great Hall of the People.

At the annual top legistaure session in Beijing, Premier Wen Jiabao reiterated the importance of achieving social equality and demonstrates the government's confidence in balancing the income distribution.

"We will quickly establish a system for monitoring income distribution. Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possible and ensure that the people share more in the fruits of reform and development."

Wen Jiabao makes such remarks as the world keeps a close eye on how the world's second largest economy will deal with its growing wealth gap and alarming inflation rate.

According to the latest statistics, China's Gini coefficient, a measure of income inequality, is approaching 0.5, from less than 0.325 just years ago. The measure ranges from 0 to 1, and the 0.4 is considered by many economists as the predictor for social instability.

Determined to shrink China's wealth gap, Wen Jiabao promises in his government work report that a string of measures will be taken in 2011.

"We will focus on increasing the basic incomes of low-income people in both urban and rural areas. We will steadily increase the minimum wage of workers, basic pensions of enterprise retirees, and subsistence allowances for both urban and rural residents. We will establish a sound mechanism of regular pay raises for workers and strictly enforce the minimum wage system."

The premier also says the government will put more effort into raising the individual income tax threshold on salaries and reducing the tax burden on low- and middle-income people.

Patrick Chovanec is associate professor of economics and management at Tsinghua University. The expert on Chinese economy is also in favor of tax adjustment on reducing the income disparity. But at the same time, he stresses that the taxation on high-income earners should be strictly enforced and regulated.

"In the United States, the top 10% of income earners account for about 60 percent of the income tax revenue. In China, lower or middle income earners account for about two thirds of the revenue. The difference isn't in the tax rate. China actually has a higher marginal tax rate than the United States for high-income earners. The gap is actually due to the fact that you have all this undisclosed income that people don't pay taxes on."

Professor Chovanec adds that, when talking about the inclusive growth, a lot of people are concerned about income inequality and they focus exclusively on wealth or income inequality. He believes what really upsets people, not only in China but all around the world, is not inequality of wealth but inequality of privileges, chances and inside tracks. He notes that to further achieve social fairness as a whole is what it takes to go far in life.

For CRI, I'm Zhao Kun.