The threshold has been increased from 2,000 yuan (309 dollars) to 3,500 yuan (542 dollars), helping to relieve pressure on low-income households which are especially vulnerable to rising inflation. Chinese officials said the move was “necessary and timely” to ease the tax burden on the poorest workers, who still represent the majority of the country’s citizens.
In a special report, the BBC looks at how the growth of China’s economy has affected its citizens’ income. The average disposable wealth of a Chinese person in 2009 was over 17,100 dollars. However, the median (which takes account of the distribution of wealth) was only around 6,300 dollars. Inequality in income is also shown by China’s Gini-coefficient, a measure of how a country’s wealth is spread across its society. In 2010, China had a rating of 0.47 (where 0 reflects total equality and 1 extreme inequality). 0.4 is usually taken as a warning that levels of inequality may threaten the stability of a society.
Many of Chinese poorest citizens live outside the cities, with around half the country’s population still in rural areas. Rural dwellers have an average disposable income of just 5,900 yuan (898 dollars), less than a third of the income earned by urban dwellers. And the gap between China’s rural and urban citizens continues to widen. Rural households also spend a higher proportion of their income on food, leaving less money for other items. In 2009, data from the National Bureau of Statistics in China showed that while 95 per cent of urban households owned a fridge, less than 40 per cent of rural households had one.
China’s government recognises the inequalities in its society and how damaging these could become in the future. Hence the rise in the income tax threshold and other recent changes to tax and labour laws designed to lift 40 million rural inhabitants out of poverty. In a statement this week, the ruling Communist Party acknowledged that it faces severe challenges, but said it was determined to guarantee development. This year, the Party will have been established for 90 years. In its commentary on the state of the nation, the Party promised it would “adapt to changes, conciliate conflicts and seize opportunities” to ensure the country moved forward. Seeing itself as responsible for the “people’s well-being” for a long time to come, Chinese Party officials know that the creation of a more equitable society will be one of the many challenges ahead.