A worrying widening of income gap

China's new rich, who have an annual per capita income of at least 300,000 yuan (35,000 euros) after tax, account for 5 percent of the total population in China, according to latest research led by Lu Xiao, assistant professor at the school of management at Shanghai-based Fudan University.

Conducted in more than 10 first-tier cities in 2008, the research found that about 50 million Chinese people earned 300,000 to 1 million yuan a year after tax, and 5 million earn more than 1 million yuan.

These people, aged 25 to 50, invest mostly in property and have other financial assets.

Other than big cities such as Beijing, Shanghai and Guangzhou, they are also in Shanxi and Fujian provinces as well as the Yangtze River Delta area.

Along with the growing number of the new rich is the widening income gap. In 2005, the World Bank reported that China's Gini coefficient, the most commonly used measure of inequality, already reached 0.47 and surpassed the red line. Experts also said the figure has increased in the past few years.

Wang Xiaolu, deputy director of the National Economic Research Institute at the China Reform Foundation, found in a 2009 survey that the income gap between high- and low-income families is much wider than what the National Bureau of Statistics reported.

According to his sample survey of about 4,000 families in more than 60 cities across China, among families with the highest income (which account for 10 percent of the total urban households), per capita annual disposable income exceeded 139,000 yuan in 2008, much higher than the 43,000 yuan recorded by the bureau.

On the contrary, for families with the lowest income (which also accounted for 10 percent of the total), the findings by the bureau and Wang were similar. Both concluded that the per capita annual disposable income for these families was about 5,000 yuan in the same year.

The widening gap highlights several major problems.

"First of all, social security and public service do not cover many low-income residents, who should be the priority target of these systems and services," Wang said.

Basic social security, including basic healthcare, endowment and unemployment insurance, covers about 40 to 50 percent of more than 300 million employees in cities and towns, leaving the other half of the workers behind. Most of the uninsured are migrant workers and low-income laborers hired by non-formal companies and organizations.

"Second, an imperfect social system has led to unfair income distribution," he continued. "As corruption has resulted in the loss of public resources irrationality prevails among the distribution of land and resource revenue as well as excessive profits of monopoly industries. These problems should be resolved through the reform of fiscal, taxation and government administrative systems."