Swell the middle-income olive

Overcoming vested interests is the key to the success of wealth distribution reforms to address gap between rich and poor

After 35 years of reform and opening-up, China is now on track for reforms to address its yawning wealth gap. The key to their success lies in whether the ongoing reforms take steps toward balancing wealth distribution. This is a continuance of the country's reform launched in 1979, which made an early breakthrough in knocking down the barriers of egalitarian distribution of wealth that enabled the country to garner extensive social support and cohesiveness.

That the Chinese terms, fuerdai, the second generation of the rich, and pinerdai, the second generation of the poor, are so often cited in everyday discussions illustrates how pressing the problem of intergenerational poverty is, and the difficulty the underprivileged have in moving up the social ladder.

According to China's National Bureau of Statistics, China's Gini coefficient, an index reflecting the gap between the rich and poor, reached 0.474 in 2012, and the figure has been above the internationally recognized waning line of 0.4 for the past decade, indicating an urgent need to accelerate income distribution reforms and pursue the following three goals.

First and foremost, residential incomes need to be increased. The central leadership set the goal at the 18th National Congress of the Communist Party of China last year of doubling the average residential income from the 2010 level by 2020. Such a goal is attainable with concrete reform measures. Data from the National Bureau of Statistics show that the per capita disposable income of urbanites grew by 6.8 percent in the first three quarters of this year, while that of rural residents grew by 9.6 percent.

With a favorable policy environment for the growth of residential incomes, it is imperative to include quantified indicators to monitor the progress made in raising residential incomes. For instance, should the GDP growth rate remain about 7 percent over the next decade, residential incomes should grow by no less than 7.5 percent on a yearly basis and the share of labor remuneration in GDP should be raised to 50 percent.