Rush for growth root of China's wealth gap
- Source: Global Times
- [22:43 March 04 2010]
- Comments
Cai Zhizhou
Editor's Note:
The gap between the rich and the poor remains one of the most talked about issues in China. As the third Session of the 11th National People's Congress opens Friday, narrowing the wealth gap and improving rural incomes are both high on the lawmaking agenda. Global Times (GT) reporter Wu Meng talked to Cai Zhizhou (Cai), deputy director of Institute of National Accounting and Economic Growth at Peking University, on the possible changes and policies that need to be made to adjust to the current social conditions.
GT: Unfairness in income distribution is extremely topical right now. Why has the gap between the rich and the poor got so large, and what can the government do about it?
Cai: The reasons for the current imbalance in the income distribution system are complicated. The trend started when the policy of reform and opening-up was first carried out in 1978. Deng Xiaoping put forward the idea that some people could get rich first, then this group of people could help the rest. This was the right decision.
But ever since then, the wealth gap has been growing. It is a problem that was formed 30 years ago, so we cannot expect to solve it within a day.
Since it took such a long time to get to this point, getting rid of the gap won't be a short-term task.
When the economy is growing rapidly, wealth gap in any country will inevitably get bigger. When the economy develops to a certain phase and slows down a bit, the gap will narrow.
Increasing the individual income tax and raising the minimum wage standard will be very effective, which is what the government is doing or planning to do at the moment.
GT: What policies can be introduced to protect the poor and the vulnerable?
Cai: Today the urban-rural differences are getting more obvious. It is crucial to raise the income level of the poor, which basically means rural people, since urban incomes have been growing rapidly.
How do we do that? First, by letting some rural laborers flow into the big cities, where their incomes can easily increase. Of course, selling your physical strength is not a good solution in the long term. To make a stable life for the rural people who have relocated in the cities, supplementary measures on education are important.
Only by providing the children of the poor with a good education can they fundamentally change their lives.
We have to be aware these things take time. It took three decades for China to successfully accomplish the goals of reform and opening-up, which resulted in the current situation. Solving these new problems will take time too.
If we push too hard or go too harsh, there will be adverse effects.
For instance, if the government pushes the enterprises too hard and levies heavy taxes in order to help the poor, businesses will eventually lose interest and even start laying workers off if things go too far. This will cause greater social instability.
