Some Chinese researchers are urging the government to increase taxes for the wealthy to help reduce the worrying income gap between rich and poor. They hope such a move will add impetus to last year's trend, when there was a slight reduction in the gap between rural and urban incomes.

Li Shi, a senior researcher with the Chinese Academy of Social Sciences, said that investigating tax evaders should also be one of the government's main focuses when looking at differences in income.

"The tax collected from the richest people is much less than what it should be," Li said. "Measures should be strengthened to monitor the process of income tax collection, in which many problems exist."

However, a senior State Council official who did not wish to be named ruled out the possibility of raising the income tax, saying, "the government is stoking up the entrepreneurial spirit and higher income tax rates will not encourage those with high incomes to invest in businesses."

China's official gauge indicating the degree of inequality between personal incomes was 0.32 in 2003, but is estimated to have dipped slightly in 2004, when farmers saw their fastest income growth since 1997.

Because of supportive policies like tax reductions in agriculture and subsidies for grain production, the average annual income for rural residents reached 2,936 yuan (US$355) last year, up 6.8 percent.

In previous years, the year-on-year growth rate never topped 5 percent.

However, rural incomes are still far behind those of urban residents, whose average annual income was 9,422 yuan (US$1,139) in 2004.

Li said his own research on income inequality shows a wider gap than the official figures.

He said China's official income gap gauge was about 0.46 in 2002, the second highest in Asia. International specialists see 0.40 as the alarm level.

Income inequality is primarily divided between urban and rural areas because of the huge number of low-income farmers.

But Li's study also found that the disposable incomes of the richest families, which account for 10 percent of the population, are eight times those of the poorest in urban areas.

In the cities, some 60 percent of disposable incomes were below average.

The income gap is also a key concern for senior Chinese officials.

In a recent survey conducted at the CPC Central Committee's Party School, nearly half of the 107 senior officials at or above city level who responded said that the growing income gap was their main concern, followed by public security and corruption.

Li suggests that the government set up a special office to address the problem of income inequality.

"The central government needs to coordinate efforts by various departments, such as finance, taxation, poverty alleviation, education and even the police," said Li.

(China Daily February 16, 2005)