Despite the government's efforts to deepen reform of the income distribution system, there are still many challenges and obstacles, analysts said.

A total of 23 provinces, regions and municipalities in China raised their local minimum wages in the first half of this year, according to the Ministry of Human Resources and Social Security.

Some provinces, such as Hubei, Hunan, Shandong and Guangdong, have increased their rate more than 20 percent, and Shanghai has the highest monthly minimum wage in the country - 1,120 yuan.

The restructuring of national income distribution has increasingly gained the attention of the nation's leaders as China's Gini coefficient, a main gauge of income disparity, surged to 0.47 in 2009, exceeding the "security line" of 0.4, indicating that unequal income distribution could cause social unrest.

Premier Wen Jiabao said in his 2010 government work report that the income distribution system was an "important manifestation of social fairness and justice and a major factor in boosting domestic demand and narrowing the income gap".

"We will not only make the 'pie' of social wealth bigger by developing the economy, but also distribute it well on the basis of a rational income distribution system," Wen said.

The nation's plan to reform the income distribution system is expected to be unveiled in the second half of this year, according to an article published on the website of the National Bureau of Statistics in late July.

However, experts pointed out that an increase in the minimum wage could be a double-edged sword.

"A hike in the minimum wage is an important government initiative intended to improve the living standards of ordinary people," said Li Shi, director of the Income Distribution and Poverty Research Center at Beijing Normal University.

"But it may also have negative consequences, especially for small- and medium-sized enterprises with thin profit margins," he said.

Still, ultra-high incomes in the country's monopoly industries have long been a source of public dissatisfaction.

The first salary survey of all types of enterprises by the National Bureau of Statistics has indicated an ownership-based disparity in income distribution.

The survey showed that the average annual salary in the non-private sector, especially State-owned enterprises (SOEs), rose 12 percent to 32,736 yuan last year. In contrast, the average annual salary in the private sector rose only 6.6 percent to 18,199 yuan.

The fact is that the average income at monopoly industries, such as telecommunications, finance, insurance and power, is two to three times that of other industries in China.

Premier Wen said in the government work report that China will accelerate the reform of monopoly industries to facilitate fair competition between private enterprises and SOEs, and set strict standards for the incomes of executives of SOEs and financial institutions.

The Ministry of Human Resources and Social Security said in a report in late June that the Chinese authorities are considering putting a ceiling on the total amount of salaries distributed at SOEs.

"To press ahead with the long-anticipated reforms of the current income distribution, the government should take concrete steps to improve people's livelihoods as a key way to boost domestic consumption and try to construct a social security network," said Qi Jingmei, a senior economic analyst with the State Information Center.

"As people's living conditions improve, they have mounting expectations for the construction of a well-developed social security network and better development in other social aspects, including employment, housing and healthcare," Qi added.

(China Daily August 4, 2010)