Beijing cares to strike an economic balance

Astounding growth comes at a price, and China’s rising rich-poor gap is a testimony to that. As the Chinese economy thrives, the growing force of urban, middle-class elite against the poorer rural inhabitants continues to pose a grave challenge for Chinese policymakers.
“China’s Gini coefficient, which is a gauge of income disparity in a country, rose to 0.474 in 2012, higher than the 0.4 level analysts often cite as a threshold for potential social unrest,” said an article in the BBC on the issue.
But the Chinese government is at least trying to address this looming problem, and a few reforms have been announced to tackle the mammoth issue of inequality. It has been planned to raise the minimum wage to 40 percent of the average of urban salaries, and a more significant policy measure is for state-owned firms to contribute a greater share of their profits to the government. A ceiling on salaries of senior management at state-owned firms was also announced as part of the plan.
The profit contributions from these SOEs will help the government build a social security net for its citizens. Beijing had been criticized for the support given to state-owned firms, such as tax breaks, access to cheap capital, etc., and increasing their contribution towards government revenues will go a long way towards addressing this grievance.
Besides this, a property transaction tax, taxes on luxury items, improving the healthcare system, increasing supply of affordable housing and increasing the scope of property taxes are also on the cards for tax reforms to reduce inequality.
Analysts are critical of the feasibility of the said reforms for focusing more on income growth than on income redistribution.
However, despite the criticism, the government has to be lauded for at least putting efforts towards minimizing the rich-poor gap and for making SOEs to contribute towards the elimination of inequality.
There are definitely lessons to be taken home for policymakers in Pakistan, but the question remains how will Pakistani SOEs contribute towards improving the country’s gini coefficient score when they are struggling to make profits in the first place?