Better distribution of income

Timetable for release of comprehensive package should be worked out for fair and balanced development

China should work out a comprehensive income distribution reform package as soon as possible to promote sustainable, fairer and more balanced development of its economy and society.

The income distribution reform, one that is closely related with China's overall social reform and development, is already receiving a great deal of attention. Whether or not some breakthroughs will be achieved in this area will produce decisive influences on the country's consumption-based economic transformation, which is now in an important period of historical opportunities. It will also play a critical role in the country's march toward a common prosperity.

The convocation of the 18th National Congress of the Communist Party of China (CPC), due in the latter half of this year, has also raised expectations within society for some key breakthroughs in the reform of the country's current fraught income distribution pattern. Such breakthroughs, if achieved, will help coordinate the country's major interest relationships, form extensive consensuses for its much-needed reforms and boost people's confidence. In view of these, China should regard the income distribution reform as a key task during the 12th Five-Year Plan period (2011-15) and try to come up with an overall reform package by the end of this year.

China explicitly said it will "regulate the incomes of high-income groups, raise those of low-income groups and expand the middle-income population" as early as 2000 when the 16th National Congress of the CPC was convened. However, no comprehensive reform package has so far been laid down to facilitate the implementation of the plan.

In the face of new reform and development conditions, the country should not postpone its income distribution reform any longer. The State Council and its relevant departments should attach high importance to income distribution reform and work out an overall package to define their responsibilities. At the same time, a definite timetable should be set.

Considering that the income distribution reform will involve a number of State departments, a multi-department group should be set up under the direct leadership of the State Council for effective policy and coordination among various departments. Besides, some short-term as well as medium-and long-term goals should also be laid down to push forward the income distribution reform during different periods.

The country should extensively collect opinions from society and try to draft an income distribution reform package within this year. To attain the target, it should try to make some improvements to its overall reform decision-making mechanism.

Given that the reform of income distribution is closely related to household interests, the country should adopt an open and interactive approach and solicit extensive opinions to make timely revisions and improvements to the income distribution reform package before its formal implementation.

Compared with reforms in other fields, reform of the country's income distribution is more complicated and thus needs a scientific decision-making process and the design of a rational system. An expert advisory committee is needed to offer advice for revisions and improvement. At the same time, some in-depth and extensive studies should be conducted to collect proposals aimed at making the income distribution reform package more feasible and operational.

Some auxiliary reform measures should also be taken to facilitate the implementation of the new income distribution reform package.

As the first step, China should lay down a public welfare-oriented State-owned capital regulation program. For example, it should give more details on the New 36 Articles, a document promulgated by the State Council in 2010 to encourage and guide the investment of non-government capital, in a bid to break the long-established State capital monopoly over some specific fields, promote the establishment of fair market competition and to improve the country's primary distribution. At the same time, it should further standardize the bonus and taxation system of State-owned enterprises to direct the flow of more State capital to some basic public service fields.

Besides, a program aimed at promoting balanced distribution of the country's basic public services should be laid down as soon as possible. More public services should tilt toward rural, underdeveloped areas and disadvantaged groups to accelerate their even distribution.

In addition, a financial and taxation reform package should also be created as early as possible to adjust the country's income distribution pattern between the government, enterprises and residents. The current pattern is due to be changed through measures aimed at controlling the fast growth of the State's fiscal revenues and the adoption of some structural tax reductions. So at the same time, active explorations should be conducted on the imposition of property and inheritance taxes and other tax categories in a bid to give the country's fiscal and taxation system a leverage role in the national income redistribution.

The author is director of the Hainan-based China Institute for Reform and Development.

(China Daily 03/13/2012 page9)