The OECD, in its economic survey of China published Tuesday, said more welfare spending in rural areas and increased migration to cities helped arrest a widening of the income gap. The Paris-based organization urged China to lower what is still a fairly high level of inequality by further boosting social programs and eliminating discrimination against rural residents.
The report is the OECD’s second major study of China, which isn’t a member of the organization. China’s economy is on pace to surpass Japan this year as the world’s second-biggest after the U.S. The OECD urged China to take a range of measures to liberalize its economy, such as freeing up interest rates to encourage banks to lend more to small companies, and privatizing state-owned enterprises. It also said that allowing the currency to appreciate would help the government manage the economy better.
China’s breakneck economic growth of the past three decades has pulled hundreds of millions of people out of poverty. But the incomes of people at the top have risen much faster than the rest, creating new divisions in a once-egalitarian society. Tensions between property developers and dispossessed farmers, and between factory bosses and their rural work force, are often a flashpoint for social conflict. That has pushed China’s government to narrow the gap, and officials have repeatedly said they will do more to boost incomes of the worst-off.
Read the full OECD report here.