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Growth in High Earners as Wealth Gap Stretches Wider

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Five percent of China's total population now have annual incomes of at least 300,000 yuan (US$45,000) after tax, according to new research.

Results of a study carried out in more than 10 major cities show roughly 50 million Chinese have passed the 300,000-yuan mark, while 5 million more are taking home in excess of 1 million yuan a year after tax.

The primary field of investment for those in the "million club" - most of whom are aged 25 to 50 - is real estate investment, said Lu Xiao, assistant professor at Fudan University's school of management, who led the research.

Information was collected in 2008 in Beijing, Shanghai and Guangzhou, as well as second-tier cities in provinces like Shanxi and Fujian and across the Yangtze River Delta. However, the rising incomes have done little to slow China's widening wealth gap.

The World Bank put the country's Gini coefficient - a key indicator of inequality - at 0.47 in 2005, passed the "red line", and experts say that figure has only increased in recent years.

A 2009 sample survey discovered that the income gap is far larger than the number given by the National Bureau of Statistics (NBS), said Wang Xiaolu, deputy director of the China Reform Foundation's national economic research institute.

According to the survey of about 4,000 families in more than 60 cities, per capita annual disposable income of high-income families was 139,000 yuan in 2008. The figure recorded by the NBS was 43,000 yuan.

Results for low-income families, however, were fairly similar, with both organizations putting the per capita annual disposable income at about 5,000 yuan in 2008.

A widening wealth gap can highlight several major problems, say analysts.

"First, social security and public services don't cover many low-income residents, who should be the priority target," said Wang, who explained that the most basic social security system, including healthcare, endowment and unemployment insurance, covers only 40 to 50 percent of more than 300 million workers in towns and cities.

"Second," he said, "as corruption results in the loss of public resources, (it means that) distribution of land and resource revenues is irrational and (produces) excess profits from monopoly industries.

"These problems should be resolved through reform of fiscal, taxation and government administrative systems," added Wang Xiaolu.

(China Daily December 3, 2010)

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