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China promises to increase minimum wage

in International Business

China promises to increase minimum wage

china povertyChina has announced to raise its minimum wage, in a bit to tackle the widening rich-poor divide in the population.

The country has enjoyed robust expansion in its economy in the past decade and has seen income levels rise, especially in urban areas. However, China’s boom has not touched a major segment of its population living in rural areas under the poverty line.

However, concerns over the widening wealth gap in China have been a threat to the political and social stability of China.

In 2012, the Gini coefficient of China was reported at 0.474 in 2012.

Gini coefficient measures the income disparity level in a country. A reading above 0.4 is often cited as a threshold for potential social unrest.

China’s plan for an increase in the minimum wage comes after long years of debate.

The plan also calls for state-owned firms to give a greater share of their profits to the government, which it said it would use to fund social security.

However, some analysts were skeptical whether the proposals will work.

“The plan suggests the government puts more weight on income growth than on income distribution,” said Zhang Zhiwei, chief China economist at Nomura.

He explained that the proposal did not set an “explicit target” for Gini coefficient but offered only an objective to “reduce population in poverty and increase size of middle class”.

“This probably reflects the difficulty the government expects to have in reducing income inequality and the strong resistance from vested interest groups,” he said.

Mr Zhiwei added that the Chinese government had announced reform plans in the past but the implementation of those plans had not been effective.

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