China says income gap peaked in '08, narrowing

[January 18, 2013]  BEIJING (AP) -- China's politically sensitive income gap between rich and poor peaked in 2008 and has narrowed since then, the government said Friday.

The announcement marked the first time in 12 years that Beijing reported its own calculation of a Gini coefficient, a standard measure for economic inequality. Critics had complained authorities were reluctant to release the number because it would highlight the size of the gap between the elite, who have benefited from three decades of economic reform, and China's poor majority.

China's Gini coefficient was 0.474 last year on a scale of 0 to 1, down from a high of 0.491 in 2008, the director of the National Bureau of Statistics, Ma Jiantang, said at a news conference. 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.

Narrowing the income gap is one of the most pressing issues for new Communist Party leaders who took power in October.

"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," Ma said.

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 Chinese officials and Communist Party figures who drive luxury cars, own multiple villas and send their children to elite foreign universities have fueled political tensions.

"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, one of China's most prominent reform advocates and a co-founder of the Unirule Institute of Economics, 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 reading of 0.5 would make China among the most unequal societies. Other researchers have estimated China's level at as high as 0.61. Ma said Brazil's Gini number was 0.55, Argentina's 0.46 and Russia's 0.40.

Communist leaders have promised more spending on health and education to shift income to the countryside and urban poor. The government has been rumored for months to be preparing to release a long-range plan to reduce inequality, but there has been no official confirmation of that.

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.

The government last reported a Gini number in 2001, when it said the figure for the previous year was 0.412. Last February, the government announced it would conduct a nationwide survey of incomes to produce data to calculate a new Gini number.

The government also needs to improve the ability of low-income Chinese to improve their lives, which is blocked by interest groups that control segments of the economy, said Mao.

" The road for people to move from low incomes to middle or high incomes is very difficult," he said. "At the beginning of China's reforms, 30 years ago, vertical mobility was relatively good. The situation now is not as good as it was in the past, because of the formation of interest groups."

[Associated Press; By JOE McDONALD]

AP writer Gillian Wong contributed.

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