The widening income gap between China's rich and poor has become a major concern. According to Fan Gang, Director of the National Economic Research Institute, there are three reasons for the disparity: an imperfect economic system, uneven development levels and deficient public policy. Excerpts of his analysis, published in People's Daily, read as follows:

Defects in the economic system are quite significant in the widening income gap. A lot of people believe the income gap is caused by corruption and illegal income, which are typical of an ill-developed system. At present, the government is trying to resolve a series of problems left over from the old system, especially corruption. The basic definition of corruption is to use public resources for private benefits. Under the traditional Chinese system, this was easily done. Corruption occurs when preference is given. The market-oriented reform aims to restore a large number of private rights. Corruption is not a problem caused by reform. Instead, it is exposed in the process of reform. The only solution is to proceed with the economic reform.

There is another problem pertaining to monopoly industries. Some enterprises monopolize production and operating resources. A relatively large income gap has therefore appeared between natural resources industries, monopoly industries and competing industries. These problems are not caused by a market economy. On the contrary, they are the result of the absence of a market economy.

A big challenge to economic development is in the imbalance of income in rural areas and between urban and rural areas, as well as regional disparities. This kind of gap usually occurs in underdeveloped and developing economies. As a lot of China's labor force is still concentrated in rural areas, it is difficult to raise the income of farmers. Even those who have migrated from the countryside find it difficult to increase their earnings, for there are limited jobs for these workers. Approximately 80 percent of workers are in the low-income category. Some do not even earn enough to be taxed. This problem can only be fundamentally resolved through sustainable economic development and full employment. It is extremely difficult to obtain an average income level through social redistribution by means of taxes and subsidies.

There are also problems in public policy, which the central and local governments need to address. The government needs to decide how to increase the earnings of low-income earners, how to protect the rights of low-income earners and how to ensure their education and basic medical services. If these measures are not sound, those who need special care and support will receive inadequate protection.

To fundamentally resolve the abovementioned problems, the government must push forward reform to ensure sustainable and long-term development, adjust public policy and create more jobs. Perhaps public policy adjustments can be achieved in a short period of time, but the reform of old systems and economic development are time-consuming.