China's wealth gap widening alarmingly; warns new survey

China's wealth gap is widening to an alarming level much to the disquiet of ruling Communist Party, according to a survey which asked the government to raise welfare and social security schemes to narrow the gap.

According to a report by the China Household Finance Survey Centre, the country's Gini coefficient, a gauge of the wealth gap, reached 0.61 in 2010, much higher than the international warning line of 0.4.

The coefficient was 0.56 in urban families and 0.60 in rural families, compared with a global average of 0. 44 in 2010, the survey published by official media said here today.

China's current income inequality is quite unusual compared with the rest of the world, Gan Li, director of the centre, but he noted that a high Gini coefficient is not disastrous and is commonly seen in the process of rapid economic growth.

In the short term, the government can narrow the wealth gap through transfer payments including welfare, social security and government subsidies, and in the long term, better education can effectively equalise opportunity, the report said.

Gan said that tax increases are not necessary to increase social security and welfare.

"Increased consumption and the retained profits of State-owned enterprises can provide the means for income redistribution, which means 3.8 trillion yuan each year," he said, noting that transfer payments can help ease a widening income gap while expanding domestic demand.

The coefficient is unlikely to see big changes in the next few years, Gan said, calling for authorities to restructure expenditures to focus on increasing social welfare instead of building roads and bridges.

China's official Gini coefficient was 0.412 for both rural and urban residents in 2000.

Since then only the Gini data for rural areas had been released, standing at 0.3897 in 2011.

A report by the National Bureau of Statistics, last year mentioned that the coefficient in 2010 was a bit higher than 0.412.

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