Lower taxes, better social welfare 'will double sector to 600 million'

The Chinese government should implement a major tax-reduction plan to expand its middle-class population to 600 million by 2020, a senior national political adviser said.

Chi Fulin, a CPPCC National Committee member, speaks to China Daily in Beijing on Friday. [Photo/ China Daily]

"We should map out a detailed national program to rapidly increase the middle class, which is the driving force of consumption," said Chi Fulin, a member of the Chinese People's Political Consultative Conference National Committee, in an exclusive interview with China Daily before the opening of the CPPCC's annual session.

The growth that Chi is calling for is almost twice the US population and about 100 million more than the European Union's.

Calling it China's "big strategy", Chi continued: "This is vital to decrease income disparity, maintain social stability and keep China's economy growing at a fast pace."

He said China's leadership promised in November at the 18th National Congress of the Communist Party of China to double the country's average 2010 income by 2020. "But I hope this will not be achieved by continually broadening the income gap," said Chi, who is serving as a CPPCC member for the second time.

The central government has also recently made public a long-awaited program on income distribution reform, "but I didn't see detailed policy portfolios and goals to expand the middle-class population in the document", said Chi, president of the Hainan-based China Institute of Development and Reform.

China's middle class currently is 23 percent of its total population, or about 300 million people. Chi said that by 2020, it should be 40 percent of the population, or 600 million.

Chi urged the central government to make middle-class growth one of the prospective indicators of its economic and social development plan. "We need to map out an action plan to realize this goal," said Chi, who has been invited by Premier Wen Jiabao to give policy suggestions four times in the past 10 years.

To prepare for the CPPCC session, Chi said he organized several closed-door seminars and fact-seeking tours. He has also submitted several proposals on reforms to government responsibilities and rural redevelopment.

Chi has made a five-point proposal to help expand the middle class. First, he said, China should have a massive tax reduction plan to increase incomes, and at the same time, the government should lower its administrative costs.

Chi also suggested that China should equally treat farmers-turned-workers as urban residents and provide social welfare for their families. Meanwhile, the government should protect the interests of those who lose their land to urban expansion and greatly increase compensation if their land is used for urban construction.

Chi said the government should take measures to increase education spending and improve the skills of college students, who could be encouraged to set up their own businesses and enter into the middle class as soon as possible after they graduate.

Chi also said China should also quicken its capital- and investment-market reform. "One major source of income of the middle-class family should come from investment in capital markets, but the systematic shortcomings of our stock and capital market have restricted such a possibility," Chi said.

Contact the writer at fujing@chinadaily.com.cn