Reform is meaningful only when it is for the people

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"Reform is meaningful only when it is for the people. Reform is dynamic only when it is by the people." This statement by Chinese President Xi Jinping encapsulates the essence and ultimate goal of China's reforms: to serve the people.

The communique adopted at the third plenary session of the 20th Central Committee of the Communist Party of China (CPC) on July 18 states, "Ensuring and enhancing the people's wellbeing in the course of development is one of the major tasks of Chinese modernization. Striving to do everything within our capacity in this regard, we must refine the system for guaranteeing basic public services, work to provide inclusive public services, meet essential needs, and provide a cushion for those most in need, and focus on resolving the most practical problems that are of the greatest and most direct concern to the people, so as to meet people's aspirations for a better life. We will improve the income distribution system, the employment-first policy, and the social security system, further reform the medical and healthcare systems, and improve the systems for facilitating population development and providing related services."

From 3,500 yuan to 5,000 yuan

In his report to the 20th National Congress of the CPC in 2022,President Xi stressed that "the system of income distribution is the foundational system for promoting common prosperity." Improving the distribution system to ensure equal opportunities enables everyone to participate in competition fairly and maximize their potential to create income and wealth and ensure a decent life.

To this end, China has deepened wage system reforms, promoting reasonable wage growth for low- and middle-income workers. In 2018, the individual income tax threshold was raised from 3,500 yuan ($482) to 5,000 yuan per month. This change reduced the proportion of taxpayers among urban workers from 44 percent to 15 percent, with additional deductions further lowering the tax burden for those earning below 20,000 yuan per month by more than 50 percent.

This is but one example of the continuous optimization of China's income distribution. Since the 18th National Congress of the CPC in 2012, residents' income and labor remuneration have steadily increased. Per capita disposable income increased from 16,510 yuan in 2012 to 36,883 yuan in 2022. This reversed the trend in the first decade of the 21st century when resident income growth lagged behind economic growth and labor remuneration growth lagged behind labor productivity improvement. The middle-income population in China now exceeds 400 million, forming the world's largest and most dynamic middle class, creating favorable conditions for an olive-shaped distribution.

Low-income groups have also seen rapid income growth. In 2021, President Xi announced that China had secured complete victory in its fight against poverty, lifting nearly 100 million rural poor out of absolute poverty,which was a miracle in human history.

Creating new employment opportunities

President Xi has emphasized the promotion of high-quality and sufficient employment as a new mission for the new era. It is essential to adhere to a people-centered development philosophy with policies that encourage self-employment, market-regulated employment, government-promoted employment, and entrepreneurship so as to enhance the sense of fulfillment, happiness and security among workers and provide powerful support for Chinese modernization and the rejuvenation of the Chinese nation.

China is creating new employment opportunities, particularly in the burgeoning digital economy. For instance, robotics engineers are key to make robots follow commands and deliver with zero error. Intelligent manufacturing engineers are needed for the layout and construction of automated production lines. Digital twin engineers will transform large factories into virtual factories. Official estimates indicate that China faces a shortage of 25 to 30 million digital professionals, a gap that is widening. In response, 97 new digital occupations were added to the latest revision of China's National Occupational Classification Code. On April 17, 2024, the Action Plan for Accelerating the Cultivation of Digital Expertise to Support the Development of the Digital Economy (2024-2026) proposed upgrading vocational education and creating new digital professions.

Since the 18th National Congress, China has prioritized employment in economic and social development, implementing an employment-first strategy and policies for more sufficient and higher-quality employment. This has improved the efficiency of labor resource allocation and helped narrow wage income disparities.

A super bargain from 700,000 yuan to 33,000 yuan

President Xi has stressed the importance of addressing the concerns and worries of the people. Ensuring and improving people's livelihoods is an ongoing process with new starting points.Targeted, wide-reaching, direct, and effective measures must be taken to solve practical problems, enhance people's wellbeing, and promote fairness. Since the 18th National Congress, China has improved its social security system, deepened healthcare reform, and enhanced population support services. It has put in place the world's largest social security safety net.

In 2021, a dramatic event went viral on the Internet. To ensure that no small group is left behind, the National Healthcare Security Administration of China reduced the price of a life-saving drug to be covered by the national medical insurance from 700,000 yuan to 33,000 yuan per dose after eight rounds of intense negotiations, making it accessible to over 30,000 patients nationwide. Hundreds of similar price reductions have eased the financial burden of medical care on the public by about 500 billion yuan over a few years.

China's social security system has played an increasingly important role in poverty alleviation, income redistribution, and social stability. The national fiscal investment in social security has continuously increased, with social security and employment spending rising from 1.44 trillion yuan in 2013 to 3.99 trillion yuan in 2023, increasing its share in fiscal expenditure from 10.3 percent to 14.5 percent.

Additionally, social security coverage and benefit levels have significantly improved. From 2013 to 2023, the number of people covered by basic pension insurance grew from 820 million to 1.07 billion, and those covered by basic medical insurance increased from 570 million to 1.33 billion.

Following a people-centered approach, China's reforms have always been driven by the fundamental interests of the people and been supported by the people. The aim is to secure happiness for the people and realize rejuvenation of the Chinese nation through comprehensively deepening reforms. The discussions at the third plenary session of the 20th Central Committee of the CPC to further reforms and advance Chinese modernization prove once again that the ultimate goal of reform and development is to improve the lives of the people.

The author Deng Quheng is Director of the Development Economics Research Office, Institute of Economics, Chinese Academy of Social Sciences. 

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