Challenges of Income Distribution Reform

As one of the hard nuts for the government to crack, China's income distribution reform has been urged for years, but without obvious results. According to "The 21st Century Business Herald," the income distribution reform plan, which was supposed to issue a general proposal before the end of 2010, was suspended, pending the cabinet's decision.

Gu Shengzu, a professor of economics at Wuhan University as well as member of the Standing Committee of the National People's Congress (NPC), said he believed income distribution to be the most arduous task in China's 12th Five-year Plan because it concerned interest readjustments for enterprises, governments and laborers.

"To increase the proportional income of the citizens means decreasing the proportion of what's allocated to the government and enterprises in the gross domestic product, Gu said. "But it's difficult for the government to cut down its proportion based on the large-scale proportion in GDP. Furthermore, it's easy for state-owned enterprises especially monopoly enterprises to increase wages, but it's hard for small and medium-sized enterprises most of which operate in low profit to do this."