BUSINESS
08/27/2012 02:56 am ET | Updated Oct 26, 2012

China Income Distribution Reform Likely To Launch In October

BEIJING, Aug 27 (Reuters) - China is likely to unveil long-awaited income distribution reform in October and is now seeking opinions from ministers and top leaders, the official Economic Information Daily reported on Monday.

The National Development and Reform Commission (NDRC), the powerful economic planner which started drafting the blueprint in 2004, was twice rejected by the State Council, or the cabinet, in early 2010 and December 2011 on its proposals.

The newspaper, run by the official Xinhua news agency, said the reform would cover 10 aspects, including minimum wages, the sharing of state firms' dividends, taxes of high-income earners, and the salaries of management team at state financial institutions. But it did not spell out details.

The reform, which aims to narrow China's income gap and boost more sustainable growth, faces strong objections from China's various vested interest groups, including corrupted officials, monopoly firms and resources-rich sectors, the paper cited an article written by Jin Aiwei, a researcher at a think tank under the NDRC.

Reuters reported in early August that China's plan to take up to half the profits of state-owned firms and give them to the government to meet a funding shortfall in social welfare had been postponed after strong resistance from state giants and their watchdog.

However, Jin said that China could face a "middle income trap" where national productivity and income growth stalls after per capita income hits $3,000 to $6,000, if it could not uphold fairness and justice in income distribution.

The 10 percent of the richest people in China have incomes 23 times of the 10 percent of the country's poorest now, up from 7.3 times in 1988, the article said.

(Reporting by Langi Chiang and Nick Edwards; Editing by Kim Coghill)