Original source: Global Times

The Chinese government is deliberating to re-divide the cake of national wealth among businesses, workers and its own revenues with a move to raise salaries and cut taxes, as a round of minimum-wage hikes kicks off this year.

The Beijing Bureau of Human Resources and Social Security announced Thursday that, from July 1, the city's minimum wage will rise by 160 yuan ($23.50), or 20 percent, from the current 800 yuan ($117.30) per month.

The capital city has set a minimum wage since 1994, and the average annual increase rate is 10.02 percent, according to the bureau, which estimates 100,000 people in the capital will benefit from the increase.

Beijing is one of about 30 provinces or municipalities that have raised or will raise their minimum wage this year, according to figures released by the Ministry of Human Resources and Social Security.

After recent raises, Shanghai currently has the highest minimum wage across the country - 1,120 yuan per month ($164.20) - and Guangdong Province claims the crown for the highest minimum wage per hour, which stands at 9.9 yuan ($1.44).

The last time much of China increased its minimum wage was two years ago, before the financial crisis.

The new round of wage increases comes as the "income distribution adjustment" is put at the top of the agenda of this year's official papers and has become a very popular topic of media coverage.

Priority plan

In a circular released Monday by the State Council, China's Cabinet, raising people's income is listed as one of the economic reform goals of this year.

Vice Premier Li Keqiang noted in an article published Tuesday by Qiushi magazine that the government will try to increase the proportion of the middle-income group and create an "olive type" wealth distribution system.

In May, officials of the National People's Congress Financial and Economic Committee carried out a study of income distribution in different localities and made a suggestion to cut taxes of enterprises in order to make room for a wage increase for workers.

Beijing News commented in an editorial Thursday that though wage increases and tax reductions are not new topics, it is a new initiative to include them in the outline of the income distribution reform, which reflects that the central government is now seriously confronting the distorted distribution of wealth among the government, enterprises and citizens.

Wang Chongfu, a professor of finance at the Beijing University of Aeronautics and Astronautics, noted that income-distribution reform is the biggest challenge for China this year, and raising the wages of workers should be the core of the adjustment policy.

Official figures show that urban residents' disposable income grew at an average 7.2 percent per year since economic reform three decades ago, and rural residents' income grew by 7.1 percent, both lower than the average growth rate of GDP, while fiscal revenues are growing at a rate of above 20 percent in recent years.

Zhang Jianguo, an official with the All-China Federation of Trade Unions, said that the wages proportion of China's GDP growth has been decreasing for 22 years, despite the fact that China is on track to replace Japan as the world's second-largest economy.

The proportion peaked at 56.5 percent in 1983, but it fell to 36.7 percent in 2005, he said, and there have not been major improvements in recent years.

Tax breaks

The low salary is believed to be one of the reasons for a series of suicides among Foxconn employees and other incidents. Lagging incomes also lead to a slump in consumption, whose contribution to China's GDP has fallen to 36 percent from 60 percent nearly 20 years ago.

Judging from the statistics, the wage increase is not in line with the surge in government revenue and businesses' profits, and cutting taxes will help make room for salary raises.

Su Hainan, director of the Labor and Wage Institute of the Ministry of Human Resources and Social Security, told People's Daily Overseas Edition that a solution for income distribution reform is expected to come by the end of this year, and it has been under discussion in the central government for years.

The current primary income distribution has many problems, as a minority of people, some enterprises, and departments and industries receive unreasonable benefits through non-labor factors such as resources and market monopoly, administrative power and special identity, Su said.

Funds for social welfare and public livelihood are also far from enough, Su added.

Su argued that China should write into its next Five-Year Plan for 2011-15 an "income-doubling" plan, like that adopted in Japan in the 1960s, as wages fall much lower than the Gross Domestic Product (GDP), which expanded 11.9 percent in the first quarter of this year.

The plan, adopted by the Japanese cabinet under Ikeda Hayato, was supposed to run from 1961 to 1970. By 1967, Japan had doubled its national income and achieved an average annual growth rate of 7.2 percent.

"China now is equipped with the required conditions to carry out a similar plan," Su said.

"If average wages increase at a rate above 15 percent year-on-year, we can achieve the goal of doubling national income in about five years."

"It doesn't necessarily mean everyone can enjoy double their income, but the majority can expect a considerable growth in their earnings," Su added.