Tackle unfairness and income gap

Poverty alleviation is not only to take care of the destitute, but also to address the unfairness in wealth distribution as well as the institutions causing the income gap. To some extent, China’s deepening of reform is a form of poverty alleviation.

If the income inequality is not solved, the accumulation of national wealth will not necessarily benefit the country, but accelerate the collapse of the unfair institutions. Reform is a way to ease the tensions and to win time for institutional changes.

Although China is the world’s second-largest economy, more than 83 million Chinese nationals earn less than $1 dollar a day. Under the new poverty benchmark announced by the World Bank, China has more than 200 million people earning $1.25 a day.

On the other hand, China is one of the largest markets for luxury goods in the world.

In 1992, the United Nations set October 17 as the International Day for the Eradication of Poverty. The day is marked with calls to draw international attention to poverty and income gap caused by economic sanctions, discrimination and excess concentration of wealth. The theme this year is “Leave no one behind: think, decide and act together against extreme poverty”.

The day provides a good opportunity to the Chinese government to reflect on its poverty-alleviation programs. China has lifted more than 600 million people out of poverty in the past 30 years. But it has also created one of the largest income gaps in the world. Gini coefficient, an index judging income gap, in China is as high as 0.47. According to international standards, if the figure is above 0.4, the income gap can threaten the stability of the society.

The regional difference in terms of economic development and the split caused by hukou, or household registration system, between the urban and the rural is a harsh test of the government’s ability to seek a balance between speed and fairness in growth.

Some argue social unfairness is an inevitable phase in rapid development, and more so in a place like China that has complicated national conditions. In fact, the market reforms started by China’s former leader Deng Xiaoping also follows this logic. Deng predicted about 30 years ago that it will be more difficult to distribute wealth than create it.

The reform process launched by the Chinese government is, to some extent, aimed at continuation of wealth creation while trying to distribute it fairly.