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Ge Yanfeng

The rapid economic development since reform and opening-up has greatly raised the living standards of the urban and rural residents. At the same time, however, the contradiction of income distribution has become more and more apparent with each passing day and begun to produce negative impact upon the stability of our society and the healthy development of our national economy. For some time in the future, and especially during the 10th Five-Year Plan period, sufficient attention should be paid to this problem.

I. Major Contradiction in the Field of Income Distribution at Present

1. The big gap between the incomes of residents

The Gini coefficient is an index commonly used in the world to measure the gap of incomes. Generally speaking, an index below 0.3 means excessive equalization of incomes, and an index above 0.4 means an excessively big gap. If the index goes above 0.45, it would indicate extreme inequality and foretell a high likeliness of occurrence of social instability or even upheavals. Before reform and opening-up, the gap of incomes was not very big either between urban residents or between rural residents, with the gap standing only between urban and rural residents. According to statistics based on several internal surveys, the Gini coefficient of the combined incomes of the urban and rural residents reached around 0.45 by the end of the 1990s. As a matter of fact, a Gini coefficient of 0.45 has still underestimated the actual gap of incomes because there is often the tendency to overestimate the incomes of groups with low incomes and underestimate the incomes of groups with high incomes. A fairly big part of the income of a farmer household, for instance, will have to be put aside for production investment for the following year. This means its income that can be truly spent on consumption would be actually much smaller. In urban areas, on the other hand, the non-currency benefit incomes of those groups with high incomes still account for a very big proportion of their total incomes and are usually excluded from their personal incomes.

2. Noticeable division between the rich and the poor

With the gradual widening of the gap of incomes, a rich class has already taken shape. Results of a survey on urban life carried out jointly by six ministries and commissions including the National Bureau of Statistics in 1997 revealed that the wealthy households accounting for 8.74 per cent of the total number of households owned 60 per cent of the financial assets owned by all the households covered in the survey. Results of a 1998 survey conducted by the National Bureau of Statistics revealed that the proportion of the banking deposits of the rural households accounting for 20 per cent of the total number of the rural households was as big as 55 per cent of the banking deposits of all the rural households. Among those with high incomes, it is not rare to see individual households whose private wealth has grown beyond tens of millions of yuan or even more. At the same time, a poor class has also developed noticeably. In the rural areas, there are still tens of millions of people who have not yet solved their problem of food and clothing; and in the urban areas, the number of households whose average per-capita monthly income and expenditure is less than 100 yuan accounted for such a big proportion as 6 per cent of the total number of the urban households sampled in a door-to-door survey conducted by several ministries and commissions in 1999.

There is one issue that calls for our full attention. The gap of incomes was widened in the 1980s and the early 1990s. This was mainly on the basis of the more or less universal increase of the income levels of most residents. Many facts since the mid-1990s have indicated, however, that the widening of the gap of incomes has begun to be characterized by a noticeable polarization of the rich and the poor. In other words, the rich have become richer and the poor poorer. Results of the survey conducted by the National Bureau of Statistics in some cities have revealed, for instance, that of the 20 per cent households with low incomes, more than 70 per cent in all the cities covered in the survey saw a decrease in their actual incomes in 1999 as compared with 1998, with the percentage in some of the cities reaching over 90 per cent. Surveys of some rural areas have already told the same story. Obviously, the widening of the gap of incomes in terms of polarization of the rich and the poor and that in terms of universal increase of incomes have totally different meanings.

3. The polarization of incomes with obvious group characteristics

The widening of the gap of incomes has not only manifested itself in the polarization of the rich and the poor in terms of individual social members, but also carried along obvious group characteristics. This is reflected mainly in the gap between the urban and the rural areas, between different regions, and between different industries and sectors, of which, the biggest problem lies in the gap between the urban and the rural areas and between different regions. A comparison of statistical data has revealed that the gap of incomes between the urban and the rural areas and that between different regions in our country have now outgrown those of nearly most countries in the world and threaten to widen further.

In addition, polarization between the stratum with high incomes and that with low incomes, and the formation of a poor stratum in particular, have also born group characteristics. In the rural areas, it is the farmers in poverty-stricken areas that have formed the poor stratum; and in the urban areas, the poor stratum is mainly composed of the staff and workers who are being employed, (laid off) or retired from state or collectively-owned enterprises with poor economic benefits, apart from the vulnerable group of the society including widowers, widows, orphans, the childless, the sick, and the disabled.

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