China's widening income disparity calls for deeper social reforms

Beijing: A recent report by the Chinese government has brought out the most obdurate paradox the country's economy is faced with.

According to the report, the per capita disposable income gained 9.5 percent to 4,140 yuan (about $608.80) in real terms in 2007 in the countryside, the largest annual growth since 1985. But the largest growth is also accompanied by the largest urban-rural income gap during the same period.

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The average city dwellers received an income that was 3.33 times larger than those in the rural areas. The income disparity amounted to 9,646 yuan, marking the largest income gap since the reform and opening up of China in 1978.

The income ratio, a gauge of balanced social development, has been showing the increasing gap since 1985, when the income growth of rural residents slowed down as the focus of reform moves from countryside to cities.

Though rural income growth once hit nine percent in 1996, it was gradually reduced to 2.1 percent in 2000.

After the government took major stimulative policies, including tax reduction, in the following years, the income growth of rural residents recovered to a higher level. For four consecutive years from 2004 to 2007, farmers saw a more-than-300-yuan increase in annual income, which means an increase of more than six percent.

Despite the improvement in farmer's disposable income, the urban and rural income gap has continued to widen in recent years.

According to the National Bureau of Statistics (NBS), the income ratio was 2.57:1 in 1978, and was reduced to 1.80:1 before it grew to 3.33:1 in 2007.

Agriculture minister Sun Zhengcai has called for more technological and financial support for the rest of the year to help farmers increase their incomes.

Though farmers' income rose at a rapid pace, the foundation for their income growth remained weak, and the channels for farmers to make money is limited, said Sun, calling for the establishment of a long-term mechanism to boost rural income.

Of the 2,528 yuan per capita cash income of farmers in the first half this year, an average of 785 yuan was earned by doing non-farming jobs, often as migrant workers in cities. 1,080 yuan per capita was gained from selling agricultural products, and 336 yuan from running businesses.

The skyrocketing producer price index, the rising wages for migrant labour and the growth of subsidies are said to have contributed to the major rise in farmers' income this year.

But the increase is nibbled away as farming costs increased because of more expensive materials. Alternative sources of employment are also diminishing as many export-oriented factories shut down in coastal areas, which employed mainly migrant workers.

Academicians and experts have delved deep into the economic and social dynamics of the Chinese society to explore ways to effectively boost farmer's income and narrow the urban-rural income gap.

Yan Chengzhong, director of the Institute of Economic Development and Cooperation of Shanghai Donghua University, attributed the problem to the disparity between urban dwellers and rural residents not only in income, but also in areas of education, medical care and welfare.

Measures have been taken to improve infrastructure and rural production. In 2007 alone, the government allocated 420 billion yuan for rural development, a sum which almost equals aggregate government spending in rural areas from 1998 to 2003. The allocation in 2008 is said to be even higher.

But the central task should be the reform of the existing dual economic structure, said Li Yining, a well-known economist who had proposed the ongoing shareholding system reform in China.

Since 2007, the government has initiated a pilot reform in two rural experiment zones in Chongqing and Chengdu, where the government explored ways to provide service in employment, education and social securities that equals those provided to urban dwellers.
Source: IANS