The plan aims to cut the number of Chinese people living below the poverty line to 80 million by 2015 from the current 128 million, by increasing farmers’ incomes and making the settling of migratory workers into cities easier, according to analysts at Raiffeisen Bank.
Further steps include raising the minimum wage, cutting taxes for small companies, increasing taxes for major state-owned companies, capping salaries of executives at state-owned companies, liberalizing financial markets to increase returns on household savings and strengthening the social security system.
“Given that the Chinese New Year is less than a week away and the official transition of the government is less than a month away, this late-night announcement could be viewed as a gift – or more precisely, a promise to give a gift – to the Chinese people from the outgoing administration,” Wei Yao, China analyst at Societe Generale, said.
Late last year, Professor Wu Jinglian, a famous Chinese economist and an adviser to China’s leaders in the 1980s and 1990s, warned against increasing inequality and the danger of “crony capitalism.”
When the new Chinese leadership was announced late last year, some analysts said the new leaders were likely to focus more on welfare and less on pushing through with market reforms.
The plan aims to double the real household income between 2010 and 2020, an issue first proposed by President Hu Jintao at the Congress of the Communist Party last autumn, Yao noted.
The minimum wage should increase to represent 40% of the urban wage by 2015, according to various media reports about the plan.
A job market plan published by the government in February last year stipulated that the average growth of the minimum wage in China should be at least 13% by 2015, according to a report by Reuters. Minimum wages in China range from 1,500 yuan ($238) per month in places like the coastal metropolis of Shenzhen to 600 yuan in the poorer south-central province of Hunan.
Reuters reported that the average salary for migrant workers jumped by 21.2% to 2,049 yuan in 2011 from 2010 and that it increased by around 12.5% per year between 2006 and 2010.
“Basically, the plan covers all the bases,” Yao said.
“Any policy that is generally accepted as being useful in improving income distribution is included in the proposal. There is nothing to agree with but everything to aspire to. We think the strategy is too comprehensive to be implementable.”
“Having said that, the plan does show that the Chinese government has recognized the severity of economic (and social) imbalance and felt the urge to change. Hopefully, 2013 will be the year of action and the government’s good promises will be eventually fulfilled.”