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Income gap in China reaches alert level
Updated: 2005-09-20 20:32

After rapid expansion since 2003, the income gap in China has reached the second most serious "Yellow Light" level, or alert level, says an article on state media.

"Unless effective measures are taken, the gap may drift further to the dangerous 'Red Light' level in the next five years," says the article in Study Times, quoting from a research report of the Ministry of Labor and Social Security.

The widening income gap in China has become a focal issue in China and aroused the concern of foreign researchers, says the article in the newspaper, which is run by the Party School of the Communist Party of China Central Committee.

It says the United Nations Development Program released statistics that show the Gini coefficient, a statistical measure of inequality in which zero expresses complete equality while one expresses complete inequality, has reached 0.45 in China; 20 percent of China's population at the poverty end accounts for only 4.7 percent of the total income or consumption; 20 percent of China's population at the affluence end accounts for 50 percent of the total income or consumption.

The article says the income gap, which has exceeded reasonable limits, exhibits a further widening trend. If it continues this way for a long time, the phenomenon may give rise to various sorts of social instability.

"It's worth noting that according to experience in many countries and regions, social contradictions will increase as per capita GDP grows from the 1,000 US dollar level to the 3,000 US dollar level. China is precisely in this period," says the article. "Decision makers should not turn a blind eye to the big income gap."

The article says the rich population consists of private business owners that got rich due to their talent and diligence as well as people who gained wealth through collusion with officials in power-for-money deals or because they happen to work in monopoly companies or because they stole state assets.

Chinese economist Wu Jinlian said "inequality of opportunity" is the root cause of the income gap.

The article says that the government has begun to take actions to adjust the income gap, as it has formally started the process to amend the individual income tax law.

"That's a good sign," says the article, but adds that the government still has a lot more to do, especially in pushing forward in an orderly way the reform of property rights of state assets, breaking monopolies that have formed on administrative orders and establishing a sound social security net.

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