China reports income gap, says action needed

Beijing • China's government reported the scale of the yawning gulf between its rich and poor for the first time in 12 years on Friday and said it urgently needs to narrow the politically explosive gap.

Beijing failed to report the widely used Gini coefficient for income distribution for a decade as complaints about the widening income gap mounted during China's fastest growth on record. That prompted suggestions the ruling Communist Party might be trying to downplay the gap between an elite who benefited from more than three decades of reform and the poor majority.

China's Gini coefficient was 0.474 last year on a 0-to-1 scale, down from a high of 0.491 in 2008, said the director of the National Bureau of Statistics, Ma Jiantang. That would make China among the world's most unequal societies. By comparison, Ma said Brazil's Gini number was 0.55, Argentina's 0.46 and Russia's 0.40.

"We must focus on income distribution," Ma said at a news conference. "On the one hand, we need to make the cake bigger, while on the other, we need to do a better job of sharing it."

Narrowing the income gap is a pressing issue for new Communist Party leaders who took power in October. The government is rumored to be preparing to release a long-range plan to reduce inequality but there has been no official confirmation.

The latest announcement follows two years of improvement in income distribution that Ma said was due to higher social spending and government efforts to improve life for the poor. Private-sector economists say, however, that much of the rise in income for China's poorest is due to wage hikes prompted by labor shortages.

China's boom has made multibillion-dollar fortunes for some entrepreneurs but income growth for the majority has been sluggish. Complaints about the lavish lifestyles of officials, Communist Party figures and military officers who drive luxury cars, own villas and send their children to elite foreign universities have fueled political tensions.

The government last issued a Gini number for 2000. Since then, Ma's agency has said it knew too little about incomes of wealthy households to do a calculation. The government announced a national survey last February to gather income data for a new calculation.

"Now, the government has officially released Gini coefficient, this shows we value the quality of GDP and are not just pursuing quantity," said economist Mao Yushi, a prominent reform advocate and a co-founder of the Unirule Institute of Economics in Beijing, an independent think tank.

The Gini figure is based on how much of a country's income goes to each economic level of society. The index ranges from zero for complete equality to 1 for perfect inequality. It also can be reported on a 100-point scale.

A report in December by researchers at Southwestern University of Finance in the southwestern city of Chengdu put China's Gini number at 0.61 for 2010.

An economist, Xu Xiaonian, ridiculed the latest poverty measure as "fake data" in a post on his microblog, reflecting widespread skepticism about the reliability of official information.

"The Gini number, even an author of fairy tales wouldn't dare write this," Xu wrote.

To make longer-term progress in narrowing the income gap, Chinese leaders will need to shake up an economic system that has created profitable monopolies and entrenched special interests, said Peng Xizhe, dean of the School of Social Development and Public Policy of Fudan University in Shanghai.

"People with vested interests wouldn't give up the benefits, so the government must adopt a great political wisdom and courage to pursue the problem," Peng said.

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AP writer Gillian Wong contributed.