Government must address wealth gap

China must address its wealth gap to ensure balanced and sustainable development, says an article in China Business News. Excerpts:

The National Bureau of Statistics released data on Jan 20 that Chinese urban residents' disposable income grew by 7 percent and the income of farmers rose 9.3 percent in 2013 after price factors were deducted. The Gini coefficient, an index reflecting the poor-rich gap, dropped to 0.473 in 2013 from a historical high of 0.491 in 2008.

But the actual wealth gap in China may be larger as the wealth of many rich people that has been transferred abroad has not been taken into account in the survey, as the State Council only required Chinese to report overseas financial property and balance conditions from Jan 1.

It is also difficult for statistics departments to follow the flow of illegal incomes of civil servants, businessmen and senior executives of State-owned enterprises.

There are two main directions for Chinese government to take to bridge the widening income gap of its citizens.

The government needs to make tax an effective tool to adjust the distribution of national wealth, as some taxes obviously fail their purposes now. The richer people are, the more income sources they have, but not all are taxed. The government and judicial authorities must take concrete action to tackle the issue of illegal incomes of this powerful group of people.

The government must also strengthen its assistance for the poor. Income tax should be levied on a family basis and give full consideration to individual family's financial burdens. Moreover, the government should improve education and medical care for the poor, as well as pension levels, to give them access to better lives.