China Concerned about Wealth Disparity

The growing inequality in China is seen by analysts as a threat to its political stability.  People in the lower economic classes are unhappy and voicing their frustration with street protests and angry blogging. In response China has pledged to tackle growing economic inequality by implementing a 35-point income distribution plan, which among other things raises the minimum wage by 40 percent, increases spending on public housing, and requires state-owned companies to payout a greater percentage of their profits in the form of dividends.

China’s goal is to raise 80 million Chinese citizens above the poverty line. The reform is also intended to distribute wealth more evenly by implementing a national property tax.  Such a tax has been discussed in the past, but the result was a narrow focus on luxury properties.  This overly-narrow focus of past property taxes may have been the result of popular anger over the way some Chinese officials had accumulated huge amounts of real estate. Some officials have been exposed as owners of over 150 properties, a figure which gives rise to suspicions about corruption.

While some have criticized China’s government for not moving with urgency, analysts are confident that the leadership in Beijing is concerned about the growing inequality and the time-sensitive nature of the plan.  China’s Gini coefficient, used to gauge income disparity, rose to 0.474 in 2012, above the 0.4 (cited by many as the threshold at which social stability is threatened), and some researchers believe that the 0.474 is an understatement.