China's wealth gap between urban and rural communities is among the highest in the world, but according to a UNDP report released today, the government is coming to grips with the widening disparities that threaten the country's stability. China's Human Development Report 2005 is the first comprehensive study to offer a set of bold and practical policy recommendations to improve conditions for the rural poor, and bolster education, health care and the social security system.

China succeeded in lifting 250 million people out of poverty over the past 25 years. However, during the same period income inequality has doubled. A person living in a city earns on average US$1000 a year, compared to just over US$300 in the countryside. An urban citizen can also expect to live over 5 years longer than a farmer. In Tibet, only half of the population can read and write while over 97 percent Chinese living in Beijing, Shanghai or Tianjin are literate. At national level, illiteracy rate for women is more than double that of men.

"The Chinese Government has realized the grave consequences of social inequity, and has started to tackle the problem head-on," says Khalid Malik, UNDP Resident Representative and UN Resident Coordinator. "This report is particularly timely as the Government is shaping its new economic blueprint to ease the strains of inequality. There is no question that more can be done to mind the gap that so often triggers social unrest when economic growth on a national scale leaves the poor and the disadvantaged behind."

The Government is already taking concrete steps to address these human development inequities. By the end of this year, it will have completely abolished agriculture taxes across the country. To improve literacy rates in rural communities, the government is promoting compulsory education for the rural poor through renovation of primary and middle schools and providing free textbooks for 24 million students from poor families.

"Inequity is evident and concrete action should be taken immediately to help those at the bottom of the economic and social ladder," said Li Shi, lead author of the report. Among the key recommendations, the authors propose:

Creating equal jobs opportunities for all

The report recommends an inclusive social security and pension insurance system to guarantee a social safety net for every worker in the country. This will require a reform of the household registration system (hukou) to ensure equal rights to workers migrating to the cities. This is a critical step to improve labour rights, particularly for the 150 million migrant workers.

China also sees a growing demand for household services among elderly people, as the country's aging and growing population will reach 1.6 billion by 2030. The report highlights the opportunity for job creation through informal employment to serve the needs of the expanding population.

The study also calls on further financial reforms to encourage more people to set up their own businesses, and recommends small loans for Chinese entrepreneurs to open small enterprises. The number of employees of state-owned or collective-owned enterprises has been decreasing through self-employment or informal employment. Small loan services can boost this trend.

Investing in basic health services for the rural poor

A farmer living in Guizhou or Yunnan can expect to live until the age of 65 while an individual in Hainan or Jiangsu can live to 74.

The authors highlight the need for sufficient preventive health care, health education, planned immunization, and control of serious infectious and endemic diseases. Only 15% of rural residents had medical insurance in 2004, whereas half of urban population benefited from full insurance.

The Government is responding to the challenge. This year, over 150 million farmers are part of a pilot cooperative medical system in rural areas to guarantee basic medical insurance for all. This new cooperative medical is funded with financial aid from central and local budgets and voluntary funds raised by the farmers themselves. Over 70 million people have benefited from the new health policies and had their medical fees reimbursed.

Make primary education top priority

Less than 1.5 percent of Tibetan children go to junior high while more than 60 percent of children in Beijing, Shanghai or Tianjin pursue their secondary education. This calls for more investment and legislation in public education to ensure compulsory primary education.

The report warns against the serious imbalances between primary and higher education in China. Efforts must be made to give top priority to primary education. The Government set the target of accessible high quality primary education, particularly for the rural population. Currently, this policy is being applied in the poverty stricken rural areas in middle and western China and continued efforts are being made to improve primary and middle schools.

The authors highlight that improving the educational level of farmers plays an important role in raising their skill levels and ultimately their incomes. To make the curriculum and the education system more relevant to the demands of the labour market, the study recommends the establishment of community universities for vocational training to disadvantage groups and enterprise training.

(UNDP.org December 16, 2005)