People’s Daily cites gap between rich and poor as the most pressing issue in China, but solution still elusive

“I would rather cry in a BMW than smile on the back of my boyfriend's bicycle”. This statement made by a female contestant Ma Nuo on a popular dating show has caused condemnation and controversy in China’s blogospere. Ma claims that she was taken out of context, but in any case, she gave a face and a name to rampant materialism, degeneration of values, and the notion that many young people will do anything to join China’s rising affluent elite, who have already become the world’s second largest buyers of luxury goods.
Indeed, the growing gap between the rich and poor has become one of the most pressing social issues in China. The Party’s official mouthpiece, the People’s Daily reported today that netizens had ranked the unequal distribution of wealth as the one they most cared about in an online survey earlier this year. And another more recent survey conducted by an affiliate of the People’s Daily found that:

Even though China's economy has maintained a steady growth, people are worried the country would fall into a "middle-income trap" and suffer from economic stagnation and various social problems…

… Corruption and the widening gap between the rich and poor are most likely to influence the nation's development, the respondents said.

These concerns are also reflected in some of the most prominent newspaper commentary, which are filled with talk of “second generation rich” (富二代) and “second generation poor” (窮二代). The real concern is that for many young people today, avenues towards upward mobility are now cut off, and the sons and daughters of Party cadres and rich entrepreneurs can not only afford the best schools, but can also use their parents contacts and social networks (guanxi), while the poor are systematically excluded from these opportunities. This type of sentiment was summed up recently by Southern Weekend columnist Dai Zhiyong who wrote that:

In education, recruitment, employment and various other sectors, the pattern of power-retention by the powerful is solidifying, yet the rights of the lower classes often suffer encroachment. The hardening of the hierarchy is right before our eyes. The channel of upward mobility for the lower classes is narrowing by the day.

[When] the lower classes face all sorts of systematic exclusion, it isn’t only bad for the poor, but also for the powerful. The consequences of the rich remaining rich and the poor being eternally poor, aside from causing personnel problems by ‘using one’s connections to the fullest’ rather than ‘using one’s ability to the fullest’ (making China ineffective as a whole), also wreck the most basic fairness value of society, with ‘connections’ and backroom deals running riot. Whilst many are becoming more extravagant by the day, masses of others can’t see hope, and the final result can only be a mangled, hierarchical social antagonism. Who could feel safe while sitting on a volcano like this? (please see the full translation at the China Geeks website).

The People’s Daily recognizes the severity of this potentially explosive problem. According to the article, China’s Gini Coefficient, which is an index that measures inequality, clocks in at 0.47 – very close to the 0.5 marker, which often signals risk of instability. It also mentions that from 1997 to 2007 labour remuneration as a percentage of GDP went from 53.4 per cent to 39.74 per cent. Workers weren’t the only ones to lose ground. People living in rural areas have also fallen behind their urban countrymen. In 1978 urban per capita income was 2.78 times higher than rural income. By 2009 that gap had widened to 3.33. Also, in cities, the richest 10 per cent controlled 45 per cent of the wealth, while the poorest 10 per cent only had 1.4 per cent.

The paper also outlines the main ways the government intends to tackle the problem. Implementing a wages increase mechanism, perfecting the minimum wage system, and ensuring wages are paid in a timely manner are all main priorities. The collective consultation system will be promoted. Farmers salaries will be increased. The social insurance system will be improved to cover those in the cities and countryside.

Although the article outlines other plans to create a more progressive tax system, the focus of redistributive efforts seems to be on the points mentioned above, and conspicuous by its absence, is the role of collective bargaining and reform of the ACFTU. Ironically, even the ACFTU sees the need for reform in order for collective consultation and collective contracts to play a major part in the government’s efforts to more equitably redistribute wealth. On 9 July 2010 the ACFTU announced that collective contracts would be a key ingredient in improving workers rights. In the China Daily, Li Shouzhen, spokesperson from the ACFTU noted that collective contracts will be promoted and but that, “…legislation will be needed first to make it mandatory for enterprises to set up such a mechanism, which is still lacking at most small and medium-sized enterprises…. if we made it mandatory (having employers sign collective contracts with their employees) and stepped up punishment for violators, I think workers would be placed in a much stronger position”.

Looking at the People’s Daily article and the ACFTU’s recent announcements, a few things become clear. On the one hand, the Party/government is crystal clear about the social problems they face as a result of inequities and injustice. On the other hand, the ACFTU still does not have the power, authority, or capacity – as the sole legally allowed union in China – to serve as a strong advocate for workers’ interests in bargaining with employers. Until the government finds a successful model for empowering workers, empowering the ACFTU, and finds a way to successfully promote bargaining at the enterprise level, it is doubtful to that “collective consultation” will be a viable way to address the growing wealth gap.

Nonetheless, even as these doubts remain over the ACFTU, it’s not stopping in its “union-building” efforts. The Financial Times reports that it’s unionizing many large foreign investment banks, including Goldman Sachs, JPMorgan, Morgan Stanley and UBS. According to a foreign banker in Suzhou, “(t)hey are actually telling us [to establish union chapters], not asking us…the feeling from everyone was – we just got a 2 per cent tax.”

All unionized enterprises are required to pay 2 per cent of their revenue to the ACFTU.
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