Prospects of the evolution of the structure of social strata

The first 20 years of the 21st century is a period of strategic opportunities for China’s reform and development, and also a crucial period for China’s economic and social development. From the prospect of development, we can say that the goal of economic gr owth can be achieved, since a socialist market economic system has already been implemented and the state has accumulated experience, as well as the means and ability of macroeconomic regulation and control. But we still face many difficulties with regard to the adjustment of the social structur e, the development of social undertakings, the reform of the management system of social undertakings, and tackling social problems. For example, there is still much work to do in reform, adjustment, and development to truly realize a coordinated development of the economy and society. Modernization will certainly not be achieved if we fail to reform the social system, promote social undertakings, and change the social structure, that is, the stratum that should expand cannot expand, the stratum that should become smaller cannot go down in size, and fanners still account for 60-70% of the total population.

In my opinion, there are three prospects for the change of the structure of social strata in China:

• The first prospect is to guide the overall economic and social development, as

well as the building of a harmonious society in accordance with the scientific outlook on development. If this can be done and we are able to cany' out the reform and construction in the social sphere and adjust the social structure; if the stratum that should expand truly expands and the stratum that should become smaller becomes smaller, thus forming an olive-shaped social structure with a relatively large middle class and if a modem, fair and

just, dynamic, open, and harmonious structure of social strata is formed; then we have achieved modernization.

• • The second prospect is that we are unable to continue and deepen the reform. Even if the per capita GDP reaches $3,000 US in the economic sphere, the social structure will remain the same. If social policies, such as progressive income tax, inheritance tax, and property tax, cannot just be enacted, and the household registration system and the system of migrant workers cannot just be changed, then a modem social structure will not be formed.
• • The third prospect is that China’s development encounters obstacles. Looking at it now, China is in a period of great opportunities for development. However, we should see that our neighbors, especially the one to the east, do not want us to grow and become rich and strong. In addition, the international environment has also an unfavorable side. If we cannot solve the domestic problems mentioned previously, the cunent onion-shaped structure will not change into a benign olive-shaped structure, but into a candlestick-shaped structure, that is, the middle and lower strata become larger and larger and the middle stratum will probably become smaller instead. The Central Committee has put forward the scientific outlook on development and the task of building a socialist harmonious society. This is a major strategic decision. As long as this is followed, I think these mentioned problems will be solved, step by step.

Let us assume that we continue to deepen the reform and follow the strategy put forward by the Central Committee, the following changes may then occur in the next 15-20 years:

• 1 Through reform and adjustment, the pace of urbanization is accelerated, changing the current state of the lag of urbanization behind industrialization. The urbanization rate in 2003 was 40.5%. If it can increase by 1 percentage point annually in the future, the urbanization rate will reach 55-60% by the year of 2020.
• 2 Adjust the relationship between the industrial and employment structure. For example, in the industrial structure of 2003, the primary industry accounted for 14.6%, but the labor force employed accounted for 49.1%, a difference of 35 percentage points. This is the root cause of fanners’ low income. If we can reduce the labor force in the primary industry by an average of 1-1.5 percentage points per year, and the agricultural labor force can be reduced to around 30%, I think it is possible for this stratum to become smaller in the social structure - as it should. The fundamental issue of the “three rural” problems is to solve the problem of fanners. Now concerned authorities only pay attention to solving the problem of agriculture and do not care about solving the problems of so many fanners. This is unacceptable.
• 3 Differences between urban and rural areas and among regions can be gradually nanowed down. Regional differences are, in fact, also an expression of the gap between urban and rural areas. In terms of income, the disposable income of urban residents in 2003 was 8,472 yuan, while the net average per capita income of fanners was 2,622 yuan. The ratio between urban and rural areas was 3.23:1. If we add other hidden incomes of urban residents and various welfare and social security benefits, the ratio would come up to 5:1. Measures should be taken to narrow down the gap by 0.1-0.2 percentage points annually, so that the income gap between urban residents and fanners will be reduced to 1.5:1 and the actual gap around 2:1. The society will then be stable.
• 4 The gap between the rich and the poor should be nanowed down gradually. In 1978, the Gini coefficient in China was 0.22; it now exceeds 0.4. Within 0.4 is considered normal, and below 0.2 is egalitarianism. The income gap has widened sharply in recent years, and now is 0.458. It is necessary to fonnulate policies to reduce the gap a little bit very year and to bring it below 0.4.
• 5 The scale of the middle stratum in society should be expanded. This is the social basis for building a hannonious society and maintaining social stability. The middle stratum was about 20% in 2004. If it can expand by 1 percentage point per year in the coming years, it will reach about 38% by 2020. When it reaches 40%, we have entered the ranks of modem societies. With such a structure of social strata, the state and society will be relatively stable.

If the social structure can really become as predicted here, China’s economic and social development will be relatively coordinated, the society will be more hannonious, and the economy and society will become more prosperous and stable.

Note

1 This article was originally published in Beijing Daily on June 19,2006.