CHINA / National

Cap urged on fat-cat SOE salaries to reduce gap
By Fu Jing (China Daily)
Updated: 2006-07-12 06:20

Incomes of employees in profitable monopoly sectors who earn up to 10 times the national average should be capped to reduce the widening wealth gap, researchers at a leading think-tank urged Tuesday.

The central government should do away with the right to profit redistribution at State-owned enterprises (SOEs), a team of experts affiliated to the Ministry of Labour and Social Security suggested.

"Capping their income, annulling profit redistribution rights and transparent auditing and supervision are a package of measures we have come up with," Liu Junsheng, a researcher with the ministry's Labour-Wage Institute, told China Daily.

"These measures could reduce the income gap between workers in monopoly sectors and average employees to a reasonable level."

He suggested that the gap should not be more than fivefold, but statistics show that the real income of people working in profitable sectors is 7-10 times higher than in other industries.

Bu Zhengfa, vice-labour minister, recently lashed out at the high salaries in the electricity, telecommunication, finance, insurance, tobacco and other monopoly industries.

The 169 major State-owned enterprises made a profit of 627.65 billion yuan (US$78.45 billion) last year, with the top 40 firms contributing 95 per cent and the top 12 accounting for 79 per cent.

At the 12 most profitable SOEs, the average cost per head was about 70,000 yuan (US$8,700) in 2005; and the figure was about 123,000 yuan (US$15,400) at China Mobile, which had 112,000 employees in 2004.

The People's Bank of China (PBOC), the central bank, said last month that urban workers earned an average of 18,400 yuan (US$2,300) last year an annualized increase of 14.8 per cent.

But it found that the income rise was mainly limited to SOEs and foreign-funded companies, at nearly 20 per cent.

In the manufacturing sector, wage increases lagged GDP growth by 5 percentage points every year between 1998 and 2003; and some factories have not given a pay rise for up to five years.

Considering income from corruption and monopolistic businesses, Wu Zhongmin, a researcher with Central Party School of the Communist Party of China, has concluded that the Gini coefficient in China has risen above 0.5.

The official level of the coefficient an international measurement of income disparity was 0.45 last year, compared with 0.389 in 1995 and 0.417 in 2000.

A zero coefficient represents perfect equality and 1 indicates a complete monopoly of wealth by the privileged; and 0.4 is considered a danger level.

The disparity and its potential social implications have attracted the attention of China's highest leadership. Speaking during a recent discussion on income distribution, President Hu Jintao said salaries should be market-oriented but the nation must focus on fairness, make favourable policies for poorer regions and crack down on illegal earnings.

In addition to capping income in monopoly sectors, Wu Jinglian, economist with the Development Research Centre of the State Council, has also called for establishing a comprehensive social security system, which he said is "well within the country's financial capacity."