When is China going to 'full-scale' reform to fight inequality?

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By Boris Cambreleng | AFP News,

China's stated aim to narrow the income gulf between its sports-car driving elite and vast numbers who still live in poverty will need radical political and economic changes to work, say economists.

Long-delayed "proposals on the distribution of income" were announced this week ahead of Sunday's Lunar New Year, as hundreds of millions working in cities returned to their rural homes, many without running water or heating.

Beijing promised to improve the lives of these rural migrant workers, who are denied equal access to health, education and housing services in cities under a half-century old system of residency permits known as "hukou".

"Migrant workers from rural areas will be assisted to register as citizens and entitled to all basic public services in the cities," according to the measures quoted by the official Xinhua news agency.

But the aspirational document was generally short of concrete steps.

Tax reductions will be "promoted" for low- and middle-income earners, it said, and the government will "target" reducing the number of people living on less than $1 a day by around 80 million by 2015.

In 2011 Xinhua said 150 million Chinese live on less than that, a stark contrast to the country's image as the world's manufacturing heartland, the holder of its biggest foreign exchange reserves and a motor of global recovery.

The extent of inequality in China, particularly between urban and rural areas, saw authorities refuse to publish the country's Gini coefficient, a commonly used measure of inequality, for more than 10 years.

In December a research centre which operates under China's central bank said its Gini coefficient stood at 0.61, one of the highest in the world. A Gini figure of zero represents perfect equality of income and 1 total inequality.

Last month China's government said the figure was 0.47, higher than the United States, and above the 0.4 figure widely cited as a "danger level" for social discontent.

Research centre director Gan Li questioned the official statistic, arguing that the government "has not published the percentage of people who refused to answer" and "the richer they are, the more likely they are to refuse to answer".

Like other economists, Gan believes the authorities underestimate the incomes of the wealthy, who hide a significant portion of their earnings.

China has seen an explosion in its luxury goods market -- which grew 56 percent last year -- as Western makers of products from designer handbags to yachts and supercars pile in.

The boom casts doubt on government statistics saying the top 10% of earners had an average annual income of 59,000 yuan ($9,500) in 2011, economist Wang Xiaolu said recently in Caijing, a respected economics journal. "Solving the income distribution issue requires full-scale reform," he wrote on his blog.

Aware of the growing resentment against the rich and endemic corruption, the Communist Party is urging officials to be frugal, pledging strict controls on government spending on banquets, car purchases and overseas travel.

But many observers say that fundamental tax reforms are essential to create more equal income distribution.

The government plan said only that property tax, which some cities have been experimenting with, will be extended, and inheritance tax will be introduced "at the appropriate time".
Local governments derive much of their income from land sales, leading to many farmers being evicted from their land and compensated below market rates.

The newly released plan says that farmers will be "guaranteed proceeds" from land sales, but Hu called for greater changes to China's system of property rights, where all land is officially owned by the state or rural collectives. "Farmers should be able to develop or sell their land, which is their collective property," he said.

Mao Yushi, a guru of economic liberalisation in China, called for reforms to the financial system, where firms with close connections to the state receive the vast majority of bank loans, leaving small-business owners short of capital.

"The princelings can go to the bank and get money just on the strength of their status and get rich on this basis," he said, referring to the children of members of the communist elite.

"The two-tier society of rich and poor is everywhe
The distinctive characteristic of China is people who have special powers and bully others."
Thanks for the 2 great answers.

Now I start to realize the reason China's inequality problem can never be solved after reading CCPkv's long answer which is somewhat like an emperor asking a beggar on the street why the latter doesn't go home to cook himself a steak instead of searching for food in trash bins.

Answer
There isn't anything the elite can really do to change the monstrosity created by CCP corruption. It runs too deep and too far to an extreme. The People no longer believe that the government has their best interests at heart...

"Limited capitalism" should NOT have been instituted ONLY for the benefit of greedy criminals. Instead of promoting unity and balance in a society, the CCP chose to employ selfishness and strong-arm tactics to abuse the poor.

Perhaps the CCP cannot learn from history, and that's why they constantly try to change it via propaganda. "French Revolution"????

The CCP f***ed-up!

Opening a Roth IRA - 19 years old with various questions?

bottledsec

Hi! So. I've been working since I was 15(?), had income coming in since then, but knew nothing really about money management so the money was just plunked into my savings account or spent. A real pity, since I recently discovered Roth IRAs and I could have started making contributions earlier... Anyways, I'm trying to start now so that I can make a full $5000 2012 contribution at least before April rolls around, and I had a couple questions!

1. I'm considering opening my Roth at Vanguard or Schwab. Vanguard pros: gain access to their great index funds; con: my balance of $5000 will only be enough to invest in maybe one fund with their minimum of $3000 for a fund. Schwab pros: their low $100 minimum for funds; cons: compared to Vanguard, they have less index fund choices. What seems like a better idea or is there a better alternative? As a note, I'm a beginner, so Scottrade, E*Trade, or other brokerages with low trade costs and such don't really interest me, since trading is yet intimidating.

2. Can I make my 2013 contribution right after my 2012 contribution? Per say, put $5000 before April, and then put $5500 for 2013 at the end of April? Also, how will my brokerage know that the $5000 is a 2012 contribution if I'm putting it in so late? Do I put a memo that it's a 2012 contribution?

3. Lastly, am I looking at everything all wrong or missing any money management tips? If I'm being an idiot, please let me know - after all.. I am barely 19 ^_^

Thanks!

Additional Information: I am a college student, I am estimating $12k in federal subsidized student loan debt (estimating interest rate at 3.4%) by the time I graduate in 2015. I may withdraw some of my contributions at that point if I don't immediately get employed. Just trying to take advantage of the Roth tax break as much as I can T__T I heard it makes a big difference later in life once you're retired...
my earned income has exceeded $5500 for the past three years.
*correction: my earned income has exceeded $5500 EACH year for the past three years. For 2012, my earned income was around $12000.

Answer
A Roth IRA has to be funded out of earned income

"You must have earned income at least equal to the amount you contribute to Roth accounts for the year. Net income from self-employment counts just the same as wage or salary income.". (Smart Money)

So what you earned at fifteen, sixteen, or seventeen cannot be invested unless you have at least $5000 in earned income this last tax year.

Secondly - "Roth contributions are nondeductible. But the earnings build up tax-free. And withdrawals are free of federal income tax as long as the account has been open at least five years and you're age 59 1/2 or older. (Smart Money)

So you've paid income tax on this money so you're not saving on taxes paid by buying a Roth IRA. and you are sure that you will not need any of this money until you're 55? Not getting married or buying a home, or a luxury car etc. etc.? It all depends on your regular savings but ROTH IRA is about retirement and I don't think it's healthy to think about retirement when you're a teenager.

Invest the money but have it in a regular brokerage account where you can spend it when you need it. Trust me - in the next forty years you'll need it. Besides, perhaps you're the next Bill Gates. Do you think he socked away $10,000 i a retirement account at 19? Does it make any difference if he did?

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