Beijing requires ‘full-scale’ reform to tackle inequality China trade picks up, inflation eases

BEIJING, Feb 8, (Agencies): China’s stated aim to narrow the income gulf between its sports-car driving elite and vast numbers who still live in poverty will need radical political and economic changes to work, say economists. Long-delayed “proposals on the distribution of income” were announced this week ahead of Sunday’s Lunar New Year, as hundreds of millions working in cities returned to their rural homes, many without running water or heating. Beijing promised to improve the lives of these rural migrant workers, who are denied equal access to health, education and housing services in cities under a half-century old system of residency permits known as “hukou”.

“Migrant workers from rural areas will be assisted to register as citizens and entitled to all basic public services in the cities,” according to the measures quoted by the official Xinhua news agency. But the aspirational document was generally short of concrete steps. Tax reductions will be “promoted” for low- and middle-income earners, it said, and the government will “target” reducing the number of people living on less than $1 a day by around 80 million by 2015. In 2011 Xinhua said 150 million Chinese live on less than that, a stark contrast to the country’s image as the world’s manufacturing heartland, the holder of its biggest foreign exchange reserves and a motor of global recovery.

The extent of inequality in China, particularly between urban and rural areas, saw authorities refuse to publish the country’s Gini coefficient, a commonly used measure of inequality, for more than 10 years.
In December a research centre which operates under China’s central bank said its Gini coefficient stood at 0.61, one of the highest in the world. A Gini figure of zero represents perfect equality of income and 1 total inequality. Last month China’s government said the figure was 0.47, higher than the United States, and above the 0.4 figure widely cited as a “danger level” for social discontent.

Research centre director Gan Li questioned the official statistic, arguing that the government “has not published the percentage of people who refused to answer” and “the richer they are, the more likely they are to refuse to answer”. Like other economists, Gan believes the authorities underestimate the incomes of the wealthy, who hide a significant portion of their earnings. China has seen an explosion in its luxury goods market — which grew 56 percent last year — as Western makers of products from designer handbags to yachts and supercars pile in.

 

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BEIJING:
China’s trade picked up and inflation eased in January as a shaky economic recovery gained traction. Much of the change was due to the Lunar New Year holiday, which distorts China’s economic data each year. But analysts said data reported Friday looked promising. Export growth accelerated to 25 percent from the previous month’s 14.1 percent as companies rushed to fill orders before shutting down for a holiday break of up to two weeks. Import growth accelerated to 28 percent, more than quadruple the previous month’s 6 percent. China’s trade growth has rebounded in recent months in a sign of economic recovery but longer-term trade measures are likely to show lower growth than January’s double-digit increase. Analysts say the recovery will be gradual and too weak to support a global rebound without improvement in the United States and Europe.

Inflation eased to 2 percent in January from the previous month’s 2.5 percent despite a 37 percent jump in vegetable prices after the coldest winter in seven years damaged crops, the National Bureau of Statistics reported. Vegetable prices in some areas soared 74.6 percent. The inflation decline was due in part to comparison with last January, when the Lunar New Year holiday began earlier and food prices spiked as families stocked up for banquets. This year, the food price spike will show up in February data.

Pressure for prices to rise has increased in recent months, possibly constraining Beijing’s ability to support the recovery if needed with more spending or interest rate cuts. Inflation is politically dangerous in a society where the poorest families spend up to half their incomes on food. Beijing is pinning its hopes for recovery on government-driven investment and domestic consumer spending. That is rising but not as fast as authorities want, forcing the government to fill the gap with spending on building subways and other public works.

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