The genie of wealth disparity

Govt must expedite reform to bridge income gap, and publicize its primary data for Gini coefficient to convince the public

The economics jargon of Gini coefficient, which measures income inequality, has become a buzzword in China since the official Gini coefficient for the country from 2003 to 2012 was released in January.

The move by the National Bureau of Statistics, however, has sparked heated debates on the accuracy of the official figures. Hence, to clear public doubt, it is advisable that the bureau publicize its primary data and calculation methodology.

The country, meanwhile, must expedite the income distribution reform to promote equality and address public concerns.

According to the NBS, the country's Gini coefficient that varies between 0, signifying complete equality, and 1, reflecting complete inequality (one person has all the income or consumption), fluctuated within a narrow band of 0.47-0.49 between 2003 and 2012. It peaked at 0.491 in 2008 before gradually falling to 0.474 in 2012.

The readings indicate a high level of inequality in China, because it is generally believed that any figure above 0.4 is undesirable in a society. But the NBS's figures are still significantly lower than that arrived at by a Southwestern University of Finance and Economics research team, which said the country's Gini coefficient was as high as 0.61 in 2010.

The NBS survey covered 140,000 families while that of the university had 8,438 respondents. Based on the number of samples, experts say, the official figures could be closer to the truth provided they have not been doctored. The public, however, doesn't tend to believe the official figures, and many online comments say the official figures are an attempt to show that inequality in the country is not as serious as people feel.

Ma Jiantang, head of the NBS, conceded in January that technical factors might have driven down the figures, and the bureau might have failed to obtain the real incomes of the rich because many of them were unwilling to divulge them.

Moreover, China is a vast country of 9.6 million square kilometers with different levels of development in different regions. So it is reasonable for China to have a higher Gini coefficient than smaller developing countries or those with a more balanced development. But still, the NBS needs to publicize its primary data and the methodology it used to arrive at the Gini coefficient to convince the public about the genuineness of its findings and enable researchers to discuss the accuracy of the official figures. Such discussions, after all, will help the NBS improve its calculation method, which is important for policymaking for the country's income distribution reform.

In early February, the NBS posted on its website the methodology it had used for the calculations. But it didn't give the public access to its primary data.

That the Gini coefficient provided by the NBS is alarming is indisputable. So the government needs to take prompt and effective measures, most importantly expediting its income distribution reform, to gradually bridge the income gap and address public concerns.

What is notable is that in recent years the government's top policy priority has been to increase inputs to improve the livelihood of the people, especially the poor, which, together with the policy to increase fiscal investment in the less developed middle and western regions, is set to help narrow the income gap among different income groups and regions.

The public's complaint is now focused on the high-income levels in the monopoly sectors and corruption-related incomes of government officials. People also deplore the pension system, which guarantees a government official two to three times higher pension than that of an employee in other sectors.

So the government must step up reforms to break the monopolies and curb corruption, neither of which are easy tasks, because vested interests will try every means possible to tilt policymaking to their advantage and postpone the reform agenda.

Such efforts will be an uphill, time-consuming battle. But without breakthroughs in such reforms, public complaints will continue to grow and, more seriously, they will cast a shadow over the future of the country, which is undergoing a painful economic and social transition.

The policymakers, therefore, are in for a real test.

The author is a writer with China Daily. E-mail: xinzhiming@chinadaily.com.cn

(China Daily 03/02/2013 page5)