Need to narrow income gap

The key issue for China now is to focus on implementing bold, comprehensive reforms to rebalance wealth distribution

According to the 2011 Forbes Billionaires List, the BRIC countries (Brazil, Russia, India and China), contributed 108 of the 214 new billionaires and accounted for one in four of the total number, a jump from one in ten five years ago. The number of Chinese billionaires on the list nearly doubled.

In striking contrast, China still has about 150 million people living on less than one US dollar per person per day and more than 60 percent of urban residents cannot afford an apartment. China's Gini coefficient, a key indicator of inequality, reached a record high of 0.49 in 2006 and has been hovering around 0.5 in recent years, surpassing the "warning line". Many people believe that the income gap is actually far larger than the official figures suggest.

The fast growth of China's economy has fueled the rising number of wealthy individuals, whose wealth comes mainly from private businesses, property speculation, initial public offerings and high-earning jobs. Interestingly, the average age of Chinese millionaires is 39 years old, 15 years younger than their Western counterparts.

Although historically the course of industrialization and modernization in pursuit of economic prosperity seems to lead inevitably to wealth disparity, the key issue for China now is to focus on implementing bold, comprehensive rebalancing reforms.

Adjusting China's development model means refocusing gross domestic product (GDP) growth toward more "people-oriented growth", in order to boost the welfare of ordinary citizens. The Chinese economy's over-reliance on investment has aggravated the declining household share of the national income, resulting in consumption making up just 35 percent of GDP. This figure is a record low for any major economy, and well below that of other developing countries such as India.

To reverse this trend, various measures need to be taken to further raise household incomes, including enacting mandatory wage growth targets, spending more on social welfare programs and expanding affordable housing, as well as comprehensively reforming the personal income tax system.

A survey, conducted by the Shanghai Committee of the China Democratic League, has found that about 68 percent of the working population in the city is employed in the lowest-paying sectors, such as manufacturing, construction, catering and retail. The minimum monthly salary is 1,120 yuan ($170), and despite ranking the second highest among Chinese cities, this is only around 30 percent of the average salary in the city, down from 44.6 percent in 1993. In contrast, an internationally accepted level is that a monthly minimum salary should be no less than 50 percent of the city's average income levels.