China: A city social dividend proposal captures national attention

Shenzhen City

Shenzhen is one of the four current first-tier cities in China, and the other three are Beijing, Shanghai and Guangzhou. In February 2017, Shenzhen Innovation and Development Institute, a famous think tank founded in 2013, issued an “Outline of Shared development in Shenzhen”, which calls for a social dividend program in a package of reform measures.

Shenzhen is the first Special Economic Zone in China. In 1980, it was a poor rural area with 30,000 people. But now, more than 30 years later, it has a population of almost 20 million, with 11.9 million local permanent residents. Its total GDP is similar to Hong Kong, one of China’s Special Administration Regions. Shenzhen citizens’ per capita GDP was US $25,400 in 2015, and it is stepping into global middle developed cities. “The Sharing Shenzhen” is a new strategy after the previous “The Speed Shenzhen” and “The Quality Shenzhen”.

Although Shenzhen’s nominal per capita GDP is similar to that of South Korea, its per capita disposal income is only half of the latter’s. At the same time, the housing price in Shenzhen is double that of South Korea. Most people are living in substandard conditions, especially those 8 million non-permanent residents who have been totally excluded from the local social security system. Furthermore, no matter their income levels or social security levels, there are big gaps among even permanent residents. The Gini coefficient in Shenzhen per capita income is almost 0.5.

Shenzhen is thus facing a very big challenge of adjusting income structures to achieve social justice. Twenty Suggestions for “The Sharing Shenzhen Outline” include:

1. One billion tax relief program, to help enterprises and people;
2. To continue to raise the minimum wage;
3. To raise working income and expand the proportion of middle-income workers;
4. To improve the salaries and benefits of civil servants, so that the city managers can share the fruit of urban reform and development;
5. To establish state-owned capital dividend fund, letting all the people share the results of reform and development of state-owned enterprises;
6. To restart the “common prosperity” plan, to reduce the gap between permanent residents and the immigrants;
7. To raise and expand the minimum guarantee income system, to cover the whole population;
8. To expand the social assistance system to the medium income families including the immigrants;
9. To establish a more equitable social security system covering the immigrants;
10. To put the non-household residents into the housing security system, to achieve the safe living dream for everyone;
11. To establish the welfare and service system for the elderly;
12. To establish the universal social welfare and relief policies, so that Shenzhen’s warmth and sunshine can reach all children;
13. To develop social charity system;
14. To reduce the subway and bus fares;
15. To promote equal employment;
16. To promote fair education;
17. To reform the expensive medical system;
18. To relax the conditions of household registration, to make more people permanent residents;
19. To control and reduce the high housing prices, to make young people full of hope and dream;
20. All residents to enjoy the right of participation in social management and assume the obligations.

For the specific suggestion No. 5, the outline suggests Shenzhen should learn from Singapore, Hong Kong and Macau to give citizens a social dividend from the city’s fiscal surplus. In 2015, Shenzhen had 918.1 billion yuan [US $135.9 billion] total assets of state-owned enterprises, 461.6 billion yuan [US $68.3 billion] net assets, and 36 billion yuan [US $5 billion] profit. In addition to the corporate tax, the municipal government should get their net profit of 12.7 billion yuan [US $1.88 billion] per year as shareholders. Based on the average dividend payout ratio of Chinese listed companies, at least one third of the annual net profit could be distributed in cash as social dividend among all the residents. Given present figures, that would be 1,000 yuan [US $148] every two years for every resident. While this dividend might appear small, it is just a very conservative part of the net profit, and we can expect an increase in the future.

In the above description, Shenzhen is basically China’s miniature. The whole country faces similar problems and situations. So this plan captured the national attention after its announcement. Additionally, the director of the Shenzhen Innovation and Development Institute, Zhang Siping, is the former deputy mayor of Shenzhen city itself, and many councilors of the Institute are formerly from government sectors. They know the real crux of the city’s development, and they are making a fair plan out of their offices. This is another reason why “The Sharing Shenzhen Outline” is so striking in China.

In fact, China has not only local but also national state-owned enterprises, and the latter ones have much bigger profits. “The Sharing Shenzhen Outline” mentions only the former. All Chinese people could expect to get a national dividend plus a local one in the future.

More background information at:

Karl Widerquist, “SINGAPORE: Government gives a ‘growth dividend’ to all adult citizens”, Basic Income News, June 8th, 2011

Special thanks to Kate McFarland for reviewing this article.