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China’s Bo Signals Wealth Gap Breached Unrest Trigger Point

China’s wealth gap has exceeded the point that triggers social unrest, according to figures revealed by Politburo member Bo Xilai, in a rare disclosure of the country’s income disparity.

China’s Gini coefficient, an index of the income gap, has exceeded 0.46, Bo, the Communist Party Secretary for Chongqing Municipality, told reporters in Beijing today, without giving specifics. The index ranges from 0 to 1 and the 0.4 mark is used as a predictor by analysts for social disturbances.

The meeting where Bo spoke, held during the annual National People’s Congress in Beijing, highlighted Chongqing’s efforts to reduce the urban-rural income gap during the past five years, encompassing Bo’s tenure. Bo, 62, has reintroduced slogans and songs from the late Chairman Mao Zedong in a bid to re-instill a Communist spirit in a country that still officially adheres to the principles espoused by Karl Marx.

“As Chairman Mao said as he was building the nation, the goal of our building a socialist society is to make sure everyone has a job to do and food to eat, that everybody is wealthy together,” Bo said. “If only a few people are rich, then we’ll slide into capitalism. We’ve failed. If a new capitalist class is created then we’ll really have turned onto a wrong road.”

In a speech later in the day attended by Bo, Wu Bangguo, head of the NPC, said China in the next year would adjust the income tax system to “give a bigger role to taxation in adjusting income distribution.”

Wukan Protests

On Monday, Guangdong Communist Party Secretary Wang Yang, like Bo a candidate for the Politburo Standing Committee, told reporters at the National People’s Congress that reform needs to “represent the interests of the people.”

He said the region would learn from protests in the village of Wukan, where demonstrators kicked out local party leaders over illegal land grabs and were later permitted to hold elections. Bo declined to comment today when asked about the protests in Wukan.

Guangdong Governor Zhu Xiaodan said today the government put the “highest priority” on the lessons it learned from Wukan and said the region was looking to crack down on official corruption and improve citizen-led supervision.

The World Bank’s data for China’s Gini coefficient goes up to 2005 and the country doesn’t regularly publish a nationwide figure. The country hasn’t disclosed an urban coefficient because it had too much trouble getting accurate information from high-income urban families, according to Ma Jiantang, the head of the National Bureau of Statistics.

‘Completely Rubbish’

Speaking at today’s briefing, Bo denied as “completely rubbish” reports that his son drives a red Ferrari, and said his son attended Harvard University and Oxford University on scholarships. He also said his wife had quit her law practice and primarily does housework now.

“I am very moved of her sacrifice,” Bo said.

So-called mass incidents in China -- strikes, riots and other disturbances -- doubled from 2006 to 2010 as China’s wealth gap rose, according to Sun Liping, a professor at Beijing’s Tsinghua University. China’s Gini coefficient has risen from 0.302 in 1978 when the Communist Party began to open the economy to market forces, according to a 2008 report by Chen Jiandong at Southwestern University of Finance and Economics in Sichuan.

China’s Gini coefficient -- and hence its wealth gap -- has risen more than any other Asian economy in the last two decades, according to Murtaza Syed, the International Monetary Fund’s resident representative in Beijing, citing World Bank data. Syed told reporters in Beijing last month that the high wealth gap may hurt China’s long-term growth prospects.

‘More Unequal’

“If China becomes more and more unequal, it may find it very hard to keep growing at anywhere near the rates it’s been growing,” Syed said on Feb. 22.

China will carry out a comprehensive survey of urban and rural salaries that may help better gauge its income gap, the China Daily reported Feb. 7, citing Xie Hongguang, a deputy head of the statistics bureau.

Inaccurate information and fragmented efforts in the past have hindered government attempts to produce a nationwide Gini coefficient, Ma told reporters Jan. 17.

A Gini level of 1 is perfect inequality, with one person holding all the wealth, and a level of zero is perfect equality.

To contact Bloomberg News staff for this story: John Liu in Beijing at +86-10-6649-7565 or jliu42@bloomberg.net

To contact Bloomberg News staff for this story: John Liu in Beijing at jliu42@bloomberg.net; Michael Forsythe in Beijing at mforsythe@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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