China vows to raise minimum wages

Business & Finance China Featured Politics - February 7th, 2013

China has pledged to increase minimum wages to tackle the growing and politically sensitive gap between rich and poor in the country.

The State Council on Tuesday unveiled a 35-point income distribution plan that will raise minimum wages to 40% of average salaries. The move could, it said, lift as many as 80 million people from poverty by 2015.

Beijing will also boost spending on education and public housing and force state-owned companies to pay out an additional five percentage points of their revenues in dividends, reports the Financial Times.

Analysts say the move reflects Communist party concern that growing inequalities could threaten political stability amid corruption scandals that has exposed Chinese officials who have amassed vast wealth.

China’s Gini coefficient – used to gauge income disparity – rose to 0.474 in 2012, above the 0.4 mark often cited by analysts as a threshold for social unrest.

The plan still faces challenges on its effectiveness and opposition from state-owned enterprises, analysts warned.

“In the past we have witnessed cases where the central government has announced reform plans but implementation was not effective. It remains to be seen how soon and how seriously these measures will be implemented,” said Zhang Zhiwei, an economist with Nomura.