Senior researchers have proposed measures for income distribution reform in China's 12th Five-Year Plan (2011-2015) to increase residents' income and narrow the nation's widening wealth gap.

Su Hainan, an expert from the Ministry of Human Resources and Social Security, said the amount of residents' income in the GDP should increase by 4 to 5 percentage points in the next five years.

While China's GDP growth skyrocketed at double digits over the past two decades, the amount of residents' income in the national GDP has been falling.

Residents' income accounted for 53.4 percent of GDP in 1990, while the figure fell to 39.7 percent in 2007, according to data from China Society of Economic Reform.

China must first raise residents' income, instead of expanding the size of the economy, to keep the world's second-largest economy from faltering, said Chi Fulin, director of the China Institute for Reform and Development based in Haikou, capital of Hainan province.

"The annual growth rate of residents' income should not be lower than 8 percent in the next five years, so as to be in step with the GDP growth rate." he said.

These experts participated in a discussion of income distribution organized by the National Development and Reform Commission and have already submitted proposals to the leadership for review.

The commission is working on a detailed proposal on distributional reform, and the full details will be revealed in March, Su said.

Income distribution reform is a central issue in China's 12th Five-Year Plan, the draft of which was discussed at the Fifth Plenary Session of the 17th Communist Party of China (CPC) Central Committee in October.

The CPC Central Committee said after a four-day meeting that in the five-year plan China will focus on stimulating domestic demand by raising residents' income.

Economists said narrowing income disparities was also a challenging task that should be listed in the plan.

China has one of the greatest wealth disparities in the world, with the richest 10 percent earning 65 times the average income of the poorest 10 percent, according to a study sponsored by Credit Suisse. A survey conducted by the Ministry of Finance in 2009 also found that the richest 10 percent of families own 45 percent of the total wealth of all urban residents.

Su said the income ratio between urban and rural residents reached 3.3:1, and it needs to be 3:1 in the next five years, while the income ratio between richest and poorest industries has risen to 15:1, and should be capped at 8:1.

The income of senior staff members in State-owned enterprises (SOEs) is 128 times higher than the national average, he said.

"Industrial monopolies, which may get access to crucial resources at low cost, earn significant profits for their employees. SOEs should pay a higher level of dividends to adjust income distribution," said Song Xiaowu, president of China Society of Economic Reform.

SOEs in other countries pay an average of 33 percent of profits as dividends to their governments while Chinese SOEs only pay 5 or 10 percent, according to a World Bank research report.

Go to Forum >>0 Comments