China plans to raise the salaries of civil servants and employees of public institutions as the government begins to reform the country's income distribution system to narrow the gap between rich and poor.

A total of 34.7 billion yuan (US$4.3 billion) will be spent this year on salary increases for 120 million people, including six million Central and local government officials, 30 million employees of public institutions, and 50 million retired military servicemen and government employees.

In addition, the stipend standards for 30 million disabled military servicemen and family members of war heroes and military servicemen and the basic subsistence allowances for city dwellers will also be raised.

The salary reforms "will help create a sound environment for the reform on income distribution system," said President Hu Jintao at a high-level meeting discussing equal income distribution early this month. Hu added that the reform is also necessary to build an efficient, transparent and honest government in accordance with the Civil Servants Law which came into force in January, stipulating a uniform salary system for civil servants across the country.

People working in remote, underdeveloped areas will also receive a special allowance and performance-related pay.

The aim of the planned pay rise is to improve the welfare of government employees in China's poor and rural regions, according to the Ministry of Personnel.

Of the six million civil servants and 30 million personnel working in publicly funded organizations across China, 60 percent work in county-level governments, with salaries dependent on local government finances. Figures from the Ministry of Personnel show that the income gap ratio between officials of the same rank in Shanghai and the northwestern province of Shaanxi can be 2.8:1.

Central Financing

Except for nine prosperous regions including Beijing, Shanghai, and the provinces of Shandong, Jiangsu and Fujian, the salary increases will be financed by the Central Government.

"It is very important to offer government administrative staff effective incentives to inspire more enthusiasm," said Liu Xin,a professor with the School of Public Administration at the Beijing-based People's University of China.

He said that it was very difficult for grassroots civil servants to secure pay increases by staying in the same position for years, while their workload and pressure continue to build. "It has inevitably led to inefficiency and turnover of competent civil servants who believe their income should match their actual contribution," he said.

Statistics from the Ministry of Personnel showed that at least 1,039 civil servants with bachelor's degrees had resigned from 21 Central Government ministries between 1998 and 2002. In the Ministry of Foreign Affairs, most of the officials who resigned were below the age of 35. A total of 123 people who worked for the Ministry of Commerce for less than three years, 72.8 percent, quit to join foreign companies, where income is based on performance.

Illegal wealth

The unfair income distribution system has prompted some officials to gain personal wealth illegally.

Xie Zhengzheng, who works in the Beijing branch of a foreign investment bank, is sceptical of the pay rises for civil servants since "their income is actually far more than the cash they receive." He said: "It includes various welfare-like assigned apartments and automobiles."

But the Ministry of Personnel insists the emphasis of the reform is to quash these unofficial bonuses and curb excessively high salaries while increasing pay for grassroots officials.