china's economy

Time for China's have-nots to share success

Next week, a group of millionaires, billionaires and bureaucrats will convene at China's National People's Congress to address the problems of millions of Chinese who have been left behind by its economic growth.
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The have-nots: young students line up to get new winter clothes during a donation ceremony in Guizhou province (AFP)
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<div style="text-align: left;"> The have-nots: young students line up to get new winter clothes during a donation ceremony in Guizhou province (AFP) </div>

Economic and social stability are expected to be the main topics during the National People’s Congress (NPC) next week, when Chinese lawmakers will announce policies aimed at promoting citizens’ well-being and encouraging consumption.

The measures may include efforts to boost rural incomes, create jobs and promote private capital investment and consumption, several China economists have noted. All that sounds very encouraging, but the individuals who comprise the congress are not inspiring much confidence among the have-nots whose interests they are supposedly looking out for.

Indeed, the group mostly consists of billionaires, bureaucrats and film stars. When it comes to China’s elite, “the richer they are, the more political positions they have”, according to the Hurun Report, which found that 15 of the country’s 50 richest people hold political offices — as do half of the top 10 richest. Property remains the biggest source of wealth.

In principle, China’s rich and powerful are motivated to discuss the alarming wealth gap, because the unbalanced distribution of wealth has become a problem China cannot avoid any longer. Even billionaire policymakers know that the left-behinds must share in China’s economic success if it is to be sustainable.

The congress will be looking for supportive fiscal policies to prop up rural households and ensure social stability. “The government has already announced initiatives on agriculture-focused development, including developing agricultural technology, increasing the minimum purchase price of rice, increasing fiscal expenditure on agriculture and improving financial services to rural areas,” said Banny Lam, an economist at CCB International.

“The income of rural residents has increased around 20% in 2011, but it still stays at the 2001 level of their urban counterparts,” said Lam.

China’s countryside is home to half of the nation’s 1.3 billion population, or more if the nomadic migrant population is included. While some people reap disproportionate rewards from China’s economic success, the rural residents and migrant workers don’t feel they get the rewards they deserve. The biggest barrier preventing them from sharing the pie is the hukou (household registration) system, which enshrines second-class citizen status and means rural citizens are paid less yet have a higher cost of living compared with their urban counterparts.

The health ministry said early this week that it will improve medical services in rural areas and that annual subsidies provided by government will reach Rmb240 ($38) per person this year from Rmb200 in 2011. It is a 20% increase, but clearly not sufficient.

Yet Beijing wants to turn the country’s thrifty savers into spenders. “Expanding domestic demand will be a top policy priority, focusing on urbanisation and more balanced regional development,” Barclays Capital said in a report. While HSBC’s economist Qu Hongbin suggested that Beijing policymakers are expected to ease on both monetary and fiscal fronts to support growth, in particular stimulating domestic demand.

The NPC, which will kick off on Monday, was once supposed to represent the average “rice-earners” and its delegates were organised into groups that represented workers, farmers and soldiers when the People’s Republic was first established in 1949 — a time when wealthy Chinese were more likely to be sent to prison farms or even executed. It seems the animals have now taken over the farm.

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