On Chinese Government's Policy Options For Wealth Gap Governance

Since the Reform and Open Policy was launched, the economy of China has increased amazingly. However, along with the rise of economy, the wealth gap between the rich and the poor in Chinese society extends continuously and becomes more evident and serious. Thus, it is urgent to solve the problem of social equity. Each government can not shirk the duty of governing the wealth gap and achieving social equity. China, as a developing country, must control and regulate the wealth gap on the premise of ensuring the fast and stable development of economy. The paper, focusing on the practical condition of China, attempts to compare and analyze the main policies raised by the government on governing the wealth gap, demonstrate that the combined policies leading by restrictive policies would adapt the Chinese national condition and govern the wealth gap, and put forwards several proposals on the specific policies which are launched by the Chinese government to govern the wealth gap.This paper is divided into four parts:Partâ… Revelation and evaluation on the wealth gap in contemporary ChinaIt is indicated by all kinds of data that the wealth gap of Chinese society extends rapidly in a quite short period since Reform and Open Policy has been launched. China stands in a transitional period changing from practicing average distribution of social wealth in late 1970s of 20th century to emerging currently a great wealth gap. Objective evaluation on the level of the wealth gap in present-day China is a basic issue for discussing governance of the gap and shows the degree of the gap and the necessity to put efforts on regulating and controlling the gap by the government. Diachronically, during more than twenty years of economic system reformation, the dramatic changes of pace and scope of the wealth gap seem to be rare and infrequent. Synchronically, China's current statistical indicators which measure income disparity and wealth gap, such as Gini coefficient and negative index, are just above the medium level of the world. It seems that the wealth gap is so large. Then, how to measure and evaluate the wealth gap of China? At the end of this part, it states a significant point of view: the actual level of the wealth gap is not only determined by income disparity and property disparity, but also affected directly by the level of economic development and the level of social security. In case of wide income disparity and property disparity, the comparatively high level of economic development and consummate social security system can narrow the practical wealth gap influentially. Therefore, when inspecting the actual level of wealth gap of a country, it is necessary not only to compare and analyze Gini coefficient and negative index but also to take into account such economic development indicators as national per capita income and economy growth pace and such factors as the level of the social security. In conclusion, in view of such factors as the level of economic development and the level of social security of present-day China, the wealth gap in Chinese society extends severely and needs to be solved by the government as soon as possible.Partâ…¡Main factors causing the wealth gap in ChinaIt is essential to find out the reason of China's rapidly expanding wealth gap between the rich and the poor in order to narrow it and achieve the ideal effects expected by the government. However, there are significant differences in academia on the issue of China's rapid expansion of the wealth gap. This paper agrees that wealth gap is the byproduct of reformation of market economic system. The lack of government policies and regulations finally results in the rapid expansion of the wealth gap. First, the wealth gap is the inevitable outcome caused by the negative impact on the reformation of market economic system. Moreover, Chinese government's policies which oppose egalitarian at the core play objectively an important role on widening the wealth gap. Finally, the lack of government regulations on the wealth gap leads to its rapid expansion.Partâ…¢Theoretical analysis of the wealth gap governanceThe wealth gap is an objective and historical phenomenon. Under the circumstances of Market Economy, the wealth gap shows its positive function to certain extent. However, once the wealth gap exceeds its reasonable limit, it will throw serious harm on social development. Overmuch wealth gap could raise the antagonism of the poverty levels against the wealthy levels, intensify all kinds of existent social conflicts, threaten political stability, as well as hinder the national economic development. Therefore, the government must govern excessive wealth gap, limit and remove the negative aspect of the wealth gap. Under the terms of a modern Market Economy, the shortcoming of market mechanisms is the essential reason for government intervention. Also, the wealth gap is a specific performance of market imperfections. Thus, the government should respond positively to the excessive wealth gap. Governance policies of wealth gap could be divided into two types, namely manipulative policies and restrictive policies. The former aims to control the extent of the wealth gap, while the latter is to limit the negative function of the gap. These two kinds of policies differ largely from each other in content. Therefore their governance effects achieve respective strengths and weaknesses. The advantage of manipulative policies lies in their abilities to reduce the wealth gap rapidly and effectively though often at the cost of sacrificing the vitality of economic growth. In contrast, restrictive policies do not function as powerfully as manipulative policies on narrowing the income disparity and property disparity. But it can remove the negative impact of the wealth gap on the premise of ensuring the economic development as fast as possible. In fact, government in whatever countries tends to combine the two kinds of policies organically rather than simply carries out one in between when it faces governing the wealth gap. However, in the specific policy combinations, it shows a clear tendency of manipulative or restrictive. The specific policies which a government chooses for governing the wealth gap are determined by its national conditions and government orientation of its central task in the current stage. The most crucial and vital factors lie in its practical stage and level of economic development.Partâ…£Chosen policy of Chinese government on governing the wealth gapThe purpose for governing the wealth gap is not to realize the relatively average distribution of social wealth, but to achieve the common prosperity of all members of society. This paper, focusing on Chinese practical condition, agrees that the primary task of Chinese government at the current stage should still ensure the fast and stable development of china's economy. Development is the last word. It would lay a solid material foundation and govern the wealth gap eventually and radically only if the higher level of economic development could be guaranteed and the"cake"of economy could become bigger. Moreover, on the premise of ensuring the economic development, the restrictive policy combinations are more adaptable to govern the wealth gap under the specific situation of China. Consequently, the Chinese government should adopt comprehensive policies which are dominated by manipulative policies and supplemented by restrictive policies to control and adjust the wealth gap. These comprehensive policies, based on consolidating and strengthening the existing manipulative policies, could limit and remove the negative aspect of wealth gap. The specific approaches are: adjusting the existing taxation and distribution system, strengthening social security system, improving the capability and heightening the level of civil service, encouraging actively and guiding and positively the folk strengths participating in the governance of the wealth gap.