Demographers, economists and others have increasingly expressed concern over the widening income disparity of the urban and rural population, and about the income gap that yawns ever wider between coastal and interior regions. Very concerned itself, Beijing has responded with initiatives such as its "Go West" investment schemes and other incentives, some amounting to thinly varnished directives. Asked why Ford located its plant in Chongqing, far from China's main supply chains and its best customer prospects, a Ford executive said the company had no choice: it was Chongqing or nothing.
Go West promoters chalked up a big win, convincing Hong Kong's Shui On Group to rebuild Chongqing's core from scratch – plus fit it out with the means to attract Chinese and foreign manufacturing and other investors. To figure out where to begin, Shui On commissioned studies that revealed that most food and clothes were imported from outside the region, even though raw materials were amply available. Chongqing, Shui On research revealed, lacked the requisite processing skills and tools.
Beijing has played with subsidies, produce pricing and the tax system in an effort to help. Last month, the central government announced plans to abolish agricultural taxes, for a US$4bn saving, and hike subsidies. As a New York Times report noted, the tax reform will only put US$5 in the pockets of China's 800m peasants who earn an average US$353 a year – but its real significance is that it rights an injustice perpetuated by an inequitable tax system that lets city workers earning US$1,200 or less a year off tax-free.
This year's tax reform follows on Beijing's commitment last year to revisit the question of land reform. While people in the cities can buy and sell their way up the economic ladder, and squatters have earned a degree of entitlement, rural land is still controlled by the state and beyond the reach of normal market mechanisms. Beijing, in insisting that tenants be compensated properly for giving up their plots, tacitly recognized that rural people have been penalized by being excluded from the market system.
Rural-urban income disparity has grown from less than twice to over three times in less than 10 years. And coastal urban to interior urban comparisons have grown to galling levels, too. More disturbing, the gap that continues to widen between interior city and interior rural populations. As a report in Caijing magazine pointed out, "the urban-rural income gap is wider in the western part of the country than in the eastern part."
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