BEIJING, PEOPLE'S REPUBLIC OF CHINA - The People's Republic of China (PRC) should broaden, deepen, and standardize its social security system to address growing income inequalities in the country and set the country on the path to long-term economic growth, Haruhiko Kuroda, President of the Asian Development Bank (ADB), said today.
Mr. Kuroda was speaking at the China Development Forum gathering of senior PRC government officials, international experts and academics in Beijing, PRC.
Over the past 30 years, the income gap between the rich and the poor in the PRC has steadily increased and is now among the widest in the world. The central and western regions, in particular, lag behind the eastern parts of the country in terms of social and economic development, and urban incomes are now almost three and a half times higher than those in rural areas.
"Income redistribution policies and social protection need to be strengthened to close the inequality gap and ensure inclusive and sustainable growth over the long term," Mr. Kuroda said.
Typically, economies around the world that have suffered wide income disparities have posted slower growth over the long-term than their counterparts that have enjoyed narrower income disparities.
He noted recent efforts by the PRC government to reduce the income gap, including initiatives in the recently approved 12th Five-Year Plan and the Social Insurance Law set to take effect in July.
Nevertheless, the President urged increased budget support to ensure universal and equal access to social benefits. The PRC needs to end the two-track system that currently differentiates between citizens registered as rural or urban residents, which makes life difficult for migrant workers. The PRC should also increase the minimum levels of salaries, pensions and disability and health insurance against the backdrop of a rapid aging in the PRC's vast population.
Introduction of a broader social security system would also boost domestic consumption.
"This in turn would play a key role in rebalancing economic growth away from excessive dependence on export-led growth strategies," said Mr. Kuroda.