Prospects of Chinese Wage Reform: A Synergy of Market and Planning Systems

Wage reform is an important aspect of Chinese economic reform. The success of wage reform is likely to depend upon the following understanding: Neither use of the efficiency‐oriented market wage system or use of the equity‐oriented planned wage system can solve the dual problem of economic growth and income distribution. A synergy of the two systems will therefore be needed. Such a synergetic wage system, which simultaneously solves the dual problem of production and distribution, can expedite the rise of social productivity – the fundamental mission in the preliminary stage of Chinese socialism. In other words, wages should be differentiated, and the differences should be related to workers′ effort and society′s demand for them. These differences, however, need not be very large.