Global Poverty Reduction and Development Forum-2012-Chapter II
Chapter II: Reflections on China’s Inclusive Growth and Poverty Reduction: Progress and Policies
HUANG Chengwei
International Poverty Reduction Center in China
Abstract: The Chinese government has been paying great attention to promoting economic development characterized by inclusive growth. In essence, inclusive growth implies realizing coordinated, balanced and sustainable economic and social development, the fruits of which are shared by the people. The fundamental elements of China’s inclusive growth include: continuous efforts on transforming economic development patterns and improving economic development quality; adherence to social justice and equality, and ensuring that the people have equal access to development opportunities, and upholding the principle of people as foremost with consistent attention to enhancing people’s livelihood. The policies adopted to reach the goal of inclusive growth include: to optimize the industrial structure, to improve workers’ capability and provide more employment opportunities for them, to narrow income gap, and to build the social security network to address education, health care, old age, and housing problems. Although it is not long that “inclusive growth” has been put forward as a concept by the government, the idea of inclusive growth, in a continuous line with the thoughts of “scientific outlook on development”, “coordinated development”, and “harmonious society”, has been practiced all along in the process of China’s reform and opening-up and modernization. The mentioned concepts might be used as positive reference for development countries.
Key Words: Inclusive Growth, Poverty Reduction, and Policies
Introduction
In 2009, President Hu Jintao of China put forward the idea of taking a comprehensive approach to development so as to achieve inclusive growth for the first time at the 17th APEC Economic Leaders' Meeting, and then at the 5th Human Resource Development Ministerial Meeting in 2010, he further expounded the idea of inclusive growth, and pointed out that, the ultimate goal of inclusive growth was to ensure all the people from all the countries and regions in the world to benefit from the economic development fruits of globalization, so as to realize balanced and coordinated economic and social development.
The fundamental elements of China’s inclusive growth include: continuous efforts on transforming economic development patterns, improving economic development quality and increase the wealth of the society to create the material foundation for people’s well-being; adherence to social justice and equality by providing an equal access to development opportunities for all and removing barriers for people to participate in economic development and share its fruits as well; and always putting people first by continuous efforts to enhance people’s livelihood for the ultimate goal of “development for the people, by the people and benefiting the people”.
I. Retrospect of China’s Process of Inclusive Growth
The idea of inclusive growth has been a principle upheld throughout China’s reform and opening-up and modernization process as well, though appearing as different forms in different development stages. The process of China’s inclusive growth might be divided into three stages, since the start of its reform and opening-up:
Nation-wide Massive Poverty Reduction Driven by Rapid Economic Growth through Economic System Reform: 1978-2001
In the very beginning of China’s reform and opening-up, 1/3 of the population was suffering from poverty and backwardness, and the primary task of social and economic development at that time was to address the pervasive poverty. In 1978, the Chinese government made a decision of shifting its focus to the development of a socialist modernization with gradual steps on economic system reform. In this stage, inclusive growth was reflected on efforts centered on economic development which was aimed at achieving a nation-wide massive poverty reduction through economic growth, fueled by system reform.
China’s rural economic system reform is carried out based on the Household Contract Responsibility System (HCRS) related to farming land practiced in early 1980s. Till 1983, 98% of the rural households had been covered by HCRS. At the same time, the government started increasing the purchasing price of agricultural products and lifted its grip on prices of agricultural products step by step. When reforming the agricultural product circulation system, the government first removed barriers related to urban-rural dualistic structure, allowing trade of agricultural products, instead of monopoly of cotton and oil, and encouraging the establishment of agricultural product market in large cities. Following the success of HCRS, the government started to guide the farmers to diversify their agricultural production. While keeping up grain production, the local governments began to develop economic crop production based on local natural conditions. In order to increase agricultural output, the government carried out massive researches on agricultural science and technology, and set up agricultural science and technology extension system at counties, which lay down solid foundation for increasing agricultural production.
China’s overall urban economic system reform kicked off in October 1984, which centered on reform of state-owned enterprises. The reformation of state-owned enterprises included reforming the income distribution relationship between the state and the enterprises with the state levying an income tax on medium and large SOEs instead of taking their profits, and establishing independent right to management by building up the systems like overall responsibility by factory managers, enterprise contract management responsibility and share holding. After 1992, owing to the gradual exposure of the defects rooted in their operation mechanisms, SOEs have gone through difficulties in market competitions, and succeeded in reviving due to restructuring. The standing of non-state-owned enterprises have been strengthened, in line with the deepening of SOEs’ restructuring. In 1987, the Chinese government put forward the concept of “Socialist Commodity Economy” and the economic development model characterized by the state adjusting the market and the market directing enterprises. After 1992, the system of “socialist market economy” has been officially established and developed. Ever since then, the unitary planning system began to change with the emerging of market actors.
Since reform and opening-up, owing to the shift of working emphasis to economic development, China has gone through rapid economic growth, with an annual GDP growth rate exceeding 9%. And through the effects of trickling down, the living standard of poor population was enhanced by economic growth. According to the poverty line set-up by the Chinese government, the extremely poor population has dropped from 0.25 billion in 1978 to 29.27 million in 2001, and accordingly the poverty rate has dropped from 30.7% to 3.2%. Especially among the late 1990s, when China’s economic growth was accelerated, the government started to adopt special poverty reduction programs, and formulated the Seven-year Priority Poverty Reduction Program (1994-2000), as a result of which, the poverty rate had been reduced from 8.8% in 1993 to 3.4% in 2000.
Coordinated Urban-Rural Development for an Equitable Growth Spurred by Policy Adjustment: 2002-2010
Since 1990s, China’s economy has witnessed continuous rapid growth. However, during the process of industrialization, rural development has lagged significantly behind urban development, and the issue of “sannong” (known as agriculture, rural areas, and farmers) began to attracting more and more attention. Poor agricultural infrastructure, backward rural social service, and widening urban-rural income gap are emerging problems hampering China’s social and economic development. The main components of China’s inclusive growth paradigm include: addressing the “sannong” problems through policy readjustment, so as to harmonize the relationship between the urban and rural areas for a balanced development.
In its 11th Five Year Plan for National Social and Economic Development (2006-2010), the Chinese government made readjustment of its economic development strategy and specified that, China had stepped into a development stage characterized by industry nurturing agriculture and urban areas supporting rural areas, and therefore had possessed the capability and conditions of paying more attention to supporting “sannong”.
At the beginning of the new century, the Chinese government has issued a series of policies favorable to rural development, including adjusting the distribution structure of national income and increasing input of fiscal expenditure, fixed assets investment and bank loans into “sannong”; enlarging the coverage of public finance and increasing provision of rural public goods; establishing a unified labor market covering urban and rural areas, removing the barriers restricting farmers from working in urban areas, conducting training classes for rural laborers, and solving the problems of default on payment to rural migrant workers and their security; further clarifying the responsibility of the governments at different levels to rural compulsory education; increasing the contribution of national finance to rural cooperative medical care system, and establishing mechanism of comprehensive arrangement for serious diseases for farmers; building up unified social welfare system covering both urban and rural areas, implementing rural subsistence security system and perfecting rural social relief system.
With the aim of reducing farmers’ financial burden and controlling arbitrary collection of fees from farmers, the central government kicked off piloting reform on rural taxation system in 2001, and in 2003 the reform was carried out nation-wide. In 2004, the decision of reducing agricultural tax increasingly till elimination was formulated, and then in 2006, the agricultural tax nation-wide was finally exempted.
These afore-mentioned policies have laid down foundation for the stable and sustainable development of agriculture by providing solutions to the problems of food, clothing and other basic needs that helped in enhancing people’s living standard and accelerating the process of reducing rural poverty. In this period, owing to the geographic decentralization of the poverty-stricken population, the Chinese government has adjusted its strategies for rural poverty reduction accordingly and worked out the Outline for Poverty Reduction and Development of China’s Rural Areas (2001-2010), shifting the target area from poverty-stricken counties to villages, which ensured the direct benefits for the poorest from the government policies. In this stage, the low-income population has dropped from 58.25 million in 2002 to 26.88 million in 2010.
Comprehensive, Coordinated and Sustainable Development through Inclusive Growth Paradigm promoted by Development of Institutional Systems
Since reform and opening-up, China has put into practice an unbalanced economic development strategy, which allowed part of its people and areas to become rich first before they could help the rest to become rich as well. This unbalanced development strategy has played an important role in initializing China’s economic system reform and spurring China’s economic take-off. However, at the same time, the unbalanced strategy has also worsened the income disparity among regions, between urban and rural areas, and among various groups. The input to people’s basic livelihood accounted has remained a small proportion of GDP, which has brought about problems like excessive reliance of economic growth on investment and export, unavailability and un-affordability of health care, unequal access to educational resources, and insufficient public infrastructures. These problems have hampered social justice, equity and stability.
Against the above mentioned background, the Chinese government made a clear statement of inclusive growth paradigm, the components of which include that with the goal of building an overall well-off society, great efforts should be taken to achieve the comprehensive, coordinated and sustainable economic and social development, and reach the target of developing by the people and for the people. Guided by the principle of inclusive growth, the Chinese government put forward the long-term task of “building a harmonious socialist society” focusing on nurturing a coordinated and harmonious development between urban and rural areas, between regions, between economic and social affairs, between human being and nature and between domestic development and opening-up, which aims to realizing a sound and rapid national economic development, enhancing people’s livelihood, and safeguarding social justice and equity.
In this period, the components of inclusive growth are focused on perfecting relative institutions, including the policies proven successful through piloting into national development plans and establishing perfect institutional system. The specifics of this idea are as following: promoting the transformation of the development pattern characterized by high input, high consumption, high emission, low recycling, and low efficiency, and establishing the clean development pattern of energy-saving and emission reduction, environment-friendliness, and land saving; furthering the overall construction and reform in each social area, including economy, politics, and culture, enhancing their coordinated development and paying special attention to improving people’s livelihood, and solving the problems of expensive educational and medical system and unaffordable housing prices; and highlighting readjustment in income distribution policies, protection of social justice and equity for a sustainable and rapid economic development.
In the coming decade, poverty reduction has been elevated to a historic position as defining the success of the whole socialist modernization. In light of this, the Chinese government has formulated and put into practice in succession the 12th Five-year National Social and Economic Development Plan (2011-2015) and the Outline Development-oriented Poverty Reduction for China’s Rural Areas (2011-2020). The Chinese government has worked out the objective for the next 10 years: to meet the policy beneficiaries’ needs for basic food, clothing, compulsory education, health care and housing. China has also identified 14 trans-provincial areas in contiguous stretches (Wuling mountainous area, Liupan mountainous area, Qinba mountainous area) as its major target areas in the coming 10 years since they are the habitat for most of China’s remaining poor.
II. Major Policies to Promote Inclusive Growth
Adjusting and Optimizing Industrial Structure and Focusing on Shifting Economic Development Pattern
With more than 30 years of development, the Chinese government has implemented a series of policies for industrial restructuring, which has enabled China to transform from low-income countries into middle-income countries. To strengthen these achievements and reach bigger development goal, the Chinese government accelerated transforming economic growth pattern.
Major policies for industrial restructuring
It is necessary to introduce more capital into weak industrial links and industries applying high and new technology. In 2009, the Program of Restructuring and Reviving 10 Key Industries was put into practice, and 20 billion RMB yuan was arranged as special funds for technological upgrading, and 4,441 projects were supported. It is estimated that, the value-added in the 6 emerging high technological industries including information, advanced equipment manufacturing, new materials, new energy resources and energy-saving, biological industry and high-end production service in 2020 will account for 20% of GDP[1].
Major policies for transforming economic growth pattern
To avoid middle income trap, the idea of speeding up transformation of economic growth pattern was clearly declared in the 11th Five-year National Social and Economic Development Plan in 2006. And 8 restrictive indicators have been applied to measure the transformation of economic growth pattern, including energy consumption, environment protection, population control, endowment insurance, and rural health care. The indicator like economic growth used to regard as foremost was put into the list of prospective indicators.
With the preliminary industrial restructuring and transformation of economic growth pattern, China’s endogenous dynamism was becoming strong and the economic structure was more reasonable. According to the data released by the National Bureau of Statistics of China, with the completion of the 11th Five-year National Plan, both the employment and the value-added of the tertiary industry have witnessed a rise: the employment of the tertiary industry increased from 31.4% of the total employment in 2005 to 33.2%in 2008, the value-added of the tertiary industry was 40.3% of GDP in 2005, and rose to 42.6%[2] in 2009.
Improving Labors’ Qualities and Capability, and Creating Opportunities for Employment and Career f Development for them
Working and Social Security Policies for Migrant Rural Workers
The evolution of China’s policies towards migrant rural workers can be divided into three stages: In the 1980s, the government had put restrictions on the migration of farmers through household registration system; since 1990s, rural surplus labors were encouraged to work in cities and townships, and the government provided them with training classes; since the new century, reform on household registration system and social security policies related to old age, medical care, housing and children’s education was conducted, with the aim of integrating migrant rural workers into urban development (the relative policies have been shown in Table 1).
With the policy adjustment mentioned above, the voluntary inflow of surplus rural workers into cities sped up, and migrant rural workers assumed the role of main force working in the secondary and tertiary industries of cities. According to the statistic report released by the National Ministry of Human Resources and Social Security, by 2009, the total migrant rural workers were counted as 0.23 billion, of which cross-region migrant rural workers were 0.145 billion[3]. The transference of rural surplus workers to cities is not only beneficial to economic growth, but also to increasing farmers’ income.
Table 1: Migrant Rural Worker Policy Evolution
|
Issuing Date |
File Title |
Central Point |
|
March 1989 |
Notice on Controlling the Migration of Rural Workers by General Office of the State Council |
Controlling Migration |
|
April 1989 |
Notice on Further Controlling the Migration of Rural Workers by the Ministry of Civil Affairs and the Ministry of Public Security |
Controlling Migration |
|
April 1990 |
Notice on Arranging the Work of Employment by the State Council |
Encouraging Employment |
|
November 1994 |
The Provisional Rules on the Cross-provincial Employment of Rural Labors |
Allowing Migration |
|
1995 |
Opinions on Strengthening Management of Migrant Rural Workers and Promoting the Local Transference of Rural Surplus Labors |
Encouraging Migration |
|
1999 |
Provisional Rules on Collection of Social Insurance Premium by the State Council |
Endowment Insurance |
|
November 2001 |
Notice on the Permission to the Ministry of Public Security for Furthering Township Household Registration Management Reform by the State Council |
Household Registration System |
|
January 2003 |
Notice on Management of Rural Labors Working in Cities by the State Council |
Employment Service |
|
April 2003 |
Regulations on Work Injury Insurance by the State Council |
Accident Insurance |
|
September 2003 |
Notice on Working for Assuring the Children of Migrant Rural Workers of Compulsory Education |
Children’s Education |
|
September 2003 |
Training Program for the Migrant Rural Workers Nationwide: 2003-2010 |
Employment Training |
|
November 2003 |
Notice on Dealing with Default on Rural Workers’ Wages in the Construction Area by the General Office of the State Council |
Wage |
|
January 2004 |
Opinions on Increasing Farmers’ Income by the Central Committee of the Communist Party of China and the State Council |
Increasing Income |
|
November 2005 |
Notice on Employment and Reemployment by the State Council |
Employment Service |
|
February 2006 |
Opinions on Solving the Problems Related to Migrant Rural Workers by the State Council |
Social Security |
|
2006 |
Notice on Special Arrangement for Migrant Rural Workers’ Participation in Medi-care Insurance by the Ministry of Labor |
Medi-care Insurance |
|
2007 |
Notice on Issuing the Key Points of Labor and Social Security in 2007 by the Ministry of Labor and Social Security |
Social Security |
|
December 2007 |
Instructions on Improving the Housing Conditions of Migrant Rural Workers |
Housing |
|
April 2010 |
Notice on Dealing with Default on Rural Workers’ Wages by the General Office of the State Council |
Wage |
Resource: the Author
Surplus Labor Transference and Labor Training
In China’s anti-poverty actions, the role of human resource has been highlighted. The surplus labors in poverty stricken areas have been organized to transfer outside after received training. Meanwhile, training was also provided to local government officials. “Sunshine Project” and “Rain and Dew Project” were designed mainly for training the migrant labors.
Sunshine Project
Sunshine project is a program for transferring and training rural labors with the aim of providing rural labors jobs and increasing their income, which is co-organized by six national ministries, e.g. the Ministry of Agriculture. Sunshine project was first implemented in the agricultural provinces like Henan Province and western provinces like Sichuan. In 2005, 2.8 million farmers have been trained, for which the special funds supported by the central finance rose to 0.4 billion RMB yuan[4]. Sunshine project is a government program sponsored by the central finance and has played an important role not only in promoting the transference of surplus labors in poverty stricken areas, but in improving the overall qualities of the whole poverty-stricken population.
Rain and Dew Project
Rain and Dew is another program for transferring and training rural labors, started in August 2004 by the State Council Leading Group Office of Poverty Alleviation and Development. Rain and Dew Project is guided by the government and has wide participation of the community, which includes vocational education, career training and agricultural technical training, with the aim of solving the problems for young and middle-age farmers of poverty stricken areas. By the end of 2010, with the help of the vocational education of Rain and Dew Project, 5 million young and middle-age poverty stricken farmers and 0.2 million demobilized soldiers have succeeded in obtaining jobs. With the aid of the agricultural technical training of Rain and Dew Project, at least one laborer from each poor rural household has acquired 1 or 2 agricultural techniques. The implementation of Raindrop Program is also the sign that the poverty reduction in China has shifted from the stage of depending on natural resources to the stage of emphasizing both natural resource development and human resource development.
Readjusting Income Distribution and Narrowing Income Gap
Individual Income Tax Policy
Individual income tax was introduced in China in 1980s. In 1980, the Individual Income Tax Law of the People's Republic of China (1980) was promulgated. In September 1986 the Provisional Regulations of Individual Income Adjustment of People’s Republic of China was published, which stated that unified individual income adjustment on each citizen’s individual income adjustment be implemented, and signified the initiation of individual income tax.
At the initial stage, the individual income tax had not been able to play the role of readjusting individual income as supposed, firstly because the taxation threshold was set fairly higher than the average income of urban residents, secondly, high income group was not effectively readjusted and thirdly, the tax was collected per person not household. By 2009, the total of individual income tax was as high as 0.3949 trillion yuan, 9.5 times that of 1999[5]. In order to reduce the taxes of low-income groups and effectively narrow income disparity, the taxation threshold has been increased to 3,500 yuan in 2011.
Agricultural Tax and other Taxes and Fees on Farmers
From the planning period till the end of 1990s in China, farmers have been bearing heavy taxes and fees, especially in the 1990s, and it was said that in some county the taxes and fees on farmers was as high as 28% of their income. From the year of 2000, pilot on reforming agricultural tax was started, and in 2002, agricultural tax was reduced to 2.8%. In 2006, not only the agricultural tax was exempted nationwide, but also the fees collected by local governments from farmers known as “three deductions” and the “five charges”. And in the same year, taxes amounting to 0.125 trillion yuan[6] have been lifted from farmers. The exemption of agricultural tax is favorable to increasing farmers’ disposable income and activating farmers’ initiatives.
Strengthening the Development of Social Security Network and the Improvement of People’s Livelihood
Since the reform and open-up, there have been high poverty rate caused by health care and education tuitions in China, owing to the over-reliance on market mechanism. And with the new century beginning, when the systems of compulsory education and medi-care security have been built up step by step, the poverty rate in China has been effectively reduced.
Popularizing Compulsory Education
In July 1986, the Compulsory Education Law of People’s Republic of China was promulgated, which signified the establishment of the system of compulsory education in China. In 1990s, the Chinese government further put forward the two objectives of popularizing the system of compulsory education, and wiping out illiteracy among young and middle-age farmers.
To reduce the development disparity between urban and rural areas, the Chinese government increased its input to rural compulsory education. From 2005-2007, the policy of exempting school sundry fees and textbook fees and provisioning bordering students living allowances had included the rural areas, and the state finance arranged 22.7 billion yuan[7].
To ensure the outlays, rural compulsory education was completely included into public finance in 2005. And since 2006, the local governments have been responsible for all the outlays for primary and middle schools.
The policy of compulsory education has played a key role in improving the educational level of Chinese people. In 1985, the average schooling years per person were 4.3, and in 2003, it rose to 8.1. By 2010, all 2,856 counties have included in the compulsory education system, the net enrollment rate of primary school is 99.70% (boy enrollment rate is 99.6% and girl enrollment rate is 99.73%), and for junior middle schools, gross enrollment rate is 100.1%, and 87.5% of the graduates go on attending high middle school [8] (shown in Fig. 1).
In a nutshell, compulsory education has played a key role in transforming the large population into rich human resources, and the subsidy policies to rural compulsory education have helped to improve the qualities of poor population and narrow development disparity between urban and rural areas.
Improving Medi-care Facilities and Services
Medi-care System Reform
Market-oriented reform of medi-care system was started in 1990s. In the urban areas medi-care system reform centered on the implementation of basic medi-care insurance system, which was piloted in 1994, and officially established in 1998. The basic medi-care insurance system included all the workers of cities and towns. Since Year 2000, the Chinese government deepened the medi-care system, with the aim of promoting equality of medi-care security and service between urban and rural areas. In 2003, the Chinese government put into practice the New Rural Medi-care Cooperative System, aimed at eliminating poverty rate caused by medi-care expenses, and improving the medi-care equality. From 2004 to 2005, the Chinese government has put in practice urban and rural medi-care relief system, to improve the capability of vulnerable groups against the risks of high medi-care expenses.
At the same time, the Chinese government has increased investment in building medical institutions. By April 2011, the medi-care institutions of China amounted to 0.941 million, among which the amount of neighborhood medi-care center is 33,000, township hospital 38,000, village post 650,000, and village clinics 175,000[9]. And in 2010, the patients of urban neighborhood medi-care institutions, township hospitals, and village clinics were 3.02 billion, with a proportion of the total patients of all the medi-care institutions[10
|
Date Source: Statistic Report of China 2010
Fig. 3 Infant Mortality Rate and Children under 5 Years Mortality Rate
Date Source: Statistic Report of China 2010
Establishment of Urban and Rural Subsistence Security System
Subsistence Security System was started in 1993 in Shanghai, and in 1997, subsistence security system was established in all the cities. In 2007, rural subsistence security system was built up.
By the end of 2010, the urban subsistence security system covered 11.45 million households or 23.105 million people (see Fig.4); 52.47 billion yuan was paid over the year for this from state and local revenues, of which the central government financial subsidy accounted for 69.7%. While the rural subsistence security system covered 25.28 million households or 52.14 million people (see Fig.5), 44.5 billion yuan was paid over the year for this, of which the central government subsidy accounted for 60.4%[12].
At present subsistence security system covering both urban and rural areas has been established and laid down foundation for ensuring rural poverty-stricken population food, clothing, and other needs. The average standard of urban subsistence allowance in 2010 was 251.2 yuan per month, with per-capital subsidy of 189.0 yuan[13]. The standard of rural subsistence allowance was 117 yuan per person per month, with per-capita subsidy of 74 Yuan[14].
Date Source: Statistic Report on the Development of Social Service (2011)
III. Suggestions on Furthering Inclusive Growth and Poverty Reduction in China
Promoting the Change of Growth Pattern: from Rapid Extensive Growth to Balanced Sustainable Growth
Overall requirements for this change are to shift from the growth pattern of over-reliance on investment, exportation, industry and consumption of material resources. To be specific, firstly, the growth rate should be moderated to a slower pace, and more resources should be used to promote economic and social structural transformation, so as to realize the shift from foreign demand driven to domestic demand driven and from production structure to consumption structure; secondly, industrial restructuring should be supported, so that more resources could be used to promote the development of tertiary industry and to realize the shift from the secondary-dominated to the tertiary-dominated; thirdly, readjustment of resource allocation should be supported, so that more resources could be put into development of new technology for reducing cost on material, energy and environment, and finally realizing the shift from extensive growth to technology-based intensive growth.
Expanding Domestic Demand and Promoting the Formation of a Consumerist Society
Firstly, it is necessary to speed up the adjustment of national income distribution structure and the reform of income distribution system, reducing gradually the proportion of governments and enterprises in national income distribution, and ensuring residents, especially middle-and-low income groups, enjoying an income growth rate not only faster than that of governments and enterprises, but also than high-income group; secondly, public rights and resources should be fully used to create more opportunities for the people increasing their income, decrease the amount of poverty stricken population, enlarge the population of middle-income and make them the main body of future Chinese society, and the mainstream of expanding domestic demand, spurring social consumption.
Protecting the Labor’s Rights and Improving Their Treatment
It is foremost to perfect the legal system related to migrant rural workers’ rights and treatment. Institutional changes are needed in time to ensure migrant rural workers to settle down in cities, obtain urban registered permanent residence, be integrated into urban social life and have better wages and social security.
Adjusting the Distribution Structure, and Narrowing Income Disparity
China lacks an effective taxation system for adjusting the income distribution relationship between different groups, which is less favorable to middle-and-low income groups. To establish a system that is both capable of regulating the income of the high-income group and providing more channels and opportunities for middle-and-low-income groups to increase income, two major rearrangements should be made: firstly, indirect taxes should be reduced gradually, and direct taxes be increased; and secondly, individual income tax is better to be changed from itemized tax into consolidated tax, and consolidated tax is on the overall income of a family, so that the situation that even low-income group and poverty-stricken population have to pay taxes could be avoided and the function of individual income tax for narrowing income gap would be improved.
Further Improving Relative System and Mechanism to Expand the Coverage of Social Security and Social Welfare Level
Although a preliminary social security system for people’s birth, aging, sickness, disability and unemployment has been established in China, middle-and-low-income groups are hardly able to benefit from this system. This is because firstly, the institutional arrangements relative to social security in different areas are not unified, especially between urban and rural areas. In the underdeveloped areas including countryside, townships and medium and small cities where people are in most need of social security the provision of social security is of lowest level. The shortage of social security will restrain the current consumption of these people and force them to save for the future; secondly, the coverage of social security system including the basic retirement security, basic medical insurance and basic unemployment insurance is set to a small group of people; and thirdly, the support from the government to social security is still weak. In Western and Northern Europe, half of the fiscal budget is used on social security and welfare, and in America, it is 30%; in China, however, it was less than 16.6% in 2009. It is obvious that not until the systematical and institutional problems are solved, would the social security system in China give full performance of its role in social redistribution and basic subsistence security.
It is important to expand the coverage of social security system to the whole society and equalize public services, which is not only helpful to rationalizing income distribution relationship but also to alleviating poverty. It is necessary to persist in deepening system reform, during which the poverty stricken population should not only be ensured to enjoy the benefits of social security, but also to pay the least cost or no cost.
IV. Implications
It is not long since the introduction of inclusive growth as a concept till the overall implementation in practice in China. But it has been lining through China’s open-up and reform and modernization, in consistence with the ideas of “Scientific Outlook on Development”, “Coordinated Development” and “Harmonious Society”, serving as the guideline for formulating development strategy at different stage. This is of great significance for developing countries working out their own development strategies.
Firstly, the essence of inclusive growth deals with the question as to who benefits from the nation’s development. The purpose of development is aimed at including as many people as possible to share with the fruits of development. From a global perspective, the coordination of countries and inclusive growth is beneficial to the stabilization of global economic development, assuring all people from all areas of enjoying economic globalization and development fruits. In a nutshell, Inclusive growth is of great significance not only for China, but also for the world.
Secondly, the concept of inclusive growth has been a continuous line throughout China’s reform and open-up and modernization, and the Chinese government has taken suitable policies according to the characteristics of different stages.
Thirdly, it is necessary to continually explore and sophisticate the policies for inclusive growth and promote the relative institutional construction step by step.
Fourthly, owing to their unique historical background and development characteristics, each country should tailored their own policies and practices favorable for inclusive growth.
Reference:
1. Duan Yujin: Retrospective on Social Policy Construction Related to Migrant Rural Workers and their Needs of Social Policies, Changchun University of Science and Technology Journal, Volume 24, 2011.
2. Huang Weijian: Influences on China caused by the Exemption of Agricultural Tax and the Future Policies, Finance & Economic Review, www.cjyj.shufe.edu.cn，October 23th, 2007.
3. Li Shi: Pro-poor Income Distribution Policies-a Report on China’s Experiences, 2011.
4. Ma Xiaohe: A Report on the Strategy for Striding over Middle Income Trap, 2011.
5. Zhang Lei: China’s Process of Poverty Reduction and Development (1949-2005), China Financial & Economic Publishing House, 2007.
6. Zhang Xiulan: Pro-poor Social Policies-A Report on China’s Experience and the Future Policies, 2011.
7. The Ministry of Civil Affairs: Statistic Report on the Development of Social Service (2011),
http://www.mca.gov.cn/article/zwgk/mzyw/201106/20110600161364.shtml.
8. The Ministry of Education: Report on the Development of China’s Education (2010) http://www.chsi.com.cn/jyzx/201107/20110706/219482079.html.
9. The Ministry of Health: on the National Medi-care (April, 2011), http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohwsbwstjxxzx/s7967/201106/52031.htm.
10. The Ministry of Health: Report on Maternal Health Care and Neighborhood Health Care,
http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohfybjysqwss/s7901/201104/51206.htm[1]Ma Xiaohe: A Report on the Strategy for Striding over Middle Income Trap, 2011.
[2] Same as Footnote1.
[3] Duan Yujin: Retrospective on Social Policy Construction Related to Migrant Rural Workers and their Needs of Social Policies, Changchun University of Science and Technology Journal, Volume 24, 2011.
[4] Zhang Lei: China’s Process of Poverty Reduction and Development (1949-2005), China Financial & Economic Publishing House, 2007.
[5] Li Shi: Pro-poor Income Distribution Policies-a Report on China’s Experiences, 2011.
[6] Huang Weijian: Influences on China caused by the Exemption of Agricultural Tax and the Future Policies, Finance & Economic Review, www.cjyj.shufe.edu.cn，October 23th, 2007.
[7]Zhang Xiulan: Pro-poor Social Policies-A Report on China’s Experience and the Future Policies, 2011.
[8]The Ministry of Education: Report on the Development of China’s Education (2010) http://www.chsi.com.cn/jyzx/201107/20110706/219482079.html.
[9] The Ministry of Health: on the National Medi-care (April, 2011), http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohwsbwstjxxzx/s7967/201106/52031.htm
[10] Same as Footnote 9
[11]The Ministry of Health: Report on Maternal Health Care and Neighborhood Health Care, http://www.moh.gov.cn/publicfiles/business/htmlfiles/mohfybjysqwss/s7901/201104/51206.htm
[12] Zhang Xiulan: Pro-poor Social Policies-A Report on China’s Experience and the Future Policies, 2011.
[13] The Ministry of Civil Affairs: Statistic Report on the Development of Social Service (2011), http://www.mca.gov.cn/article/zwgk/mzyw/201106/20110600161364.shtml
[14] Same as Footnote 13.
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