This spring, I toured China's inland areas via Shanghai, where I saw citizens using a single card that allows them to pay for subway, train, bus and taxi fares. I heard the card was introduced a year ago. In Tokyo, the Suica card, which can only be used to ride JR trains, recently took off.

Things were entirely different in smaller cities and farming communities in the inland area just a few hundred kilometers from Shanghai, however. So much so that I felt as though I was in a different country.

While the number of poor people in farming areas has declined sharply over the past 20 years, China still has 30 million people living below the poverty line of 10,000 yen a year. When low-income earners in farming areas who barely make ends meet earning about 13,000 yen a year are added to the group, China's poor make up about 100 million people-close to Japan's total population.

In addition to the widening gap in income between farmers and industrial workers and between regions, an increase of the poor population in urban areas has emerged in recent years as a new problem. On one hand, the so-called middle class is growing rapidly, centering on urban areas in the coastal region. Simultaneously, however, urban low-income earners are also on the rise.

According to government statistics, about 14 million poor urban residents cannot afford medical treatment when they become sick. Experts estimate they actually number about 23 million, however, or about 5 percent of China's urban population.

Most of them are unemployed people who have been laid off by state-run corporations or whose former employers went bankrupt. More than 25.56 million workers were laid off in the four years leading up to 2001. China's largest oil company, China Petroleum and Natural Gas Group, laid off 360,000 workers-about 30 percent of its employees-in the last two years.

Even poor farmers are able to feed themselves, albeit barely, and they are scattered nationwide.

By contrast, poor people in urban areas are less independent and lack the means to support themselves. They are also more concentrated and tend to be more unhappy when they compare themselves with richer people around them.

Demonstrations and strikes against delayed payments of living expenses, expensive medical fees and pension plans, and corrupt managers began occurring frequently nationwide last year.

In March, 20,000 workers laid off at Daqing Oilfield, China's largest oil well, staged a demonstration, surrounding the head office and demanding better compensation. Moves to form ``free labor unions'' are also emerging.

According to a forecast by the Ministry of Labor and Social Security, the situation is expected to grow more serious with China's entry into the World Trade Organization. The next five years will give rise to 50 million additional jobs. At the same time, however, the advancement of foreign companies into China will put pressure on state-owned corporations to slash workers.

The movement of people from farming villages to urban areas is also expected to accelerate with the influx of cheap foreign grain. Even if China is able to continue 7 percent economic growth, the number of jobless and poor urban residents is expected to keep rising for some time. This is China's reality.

The Chinese leadership appears to acknowledge the seriousness of the problem.

At the National People's Congress (NPC) in March, Premier Zhu Rongji announced a set of policy measures aimed at protecting the socially weak. They include the establishment of a system to secure the livelihood of people in the low-income bracket, expansion and strengthening of various social security systems, such as pension and medical plans, and alleviation and abolition of diverse nontax levies for farmers.

Deng Xiaoping advocated that people and places that can become rich before others should do so. Perhaps this philosophy was inevitable at the start, but if the poor population drastically increases and the gap between the rich and the poor widens, society could fall into confusion and the fruit of economic advancement in the last two decades could immediately collapse.

President Jiang Zemin's leadership is shifting government policy to ``make everybody rich at the same time.'' To realize this goal, however, it needs to follow a basic strategy aimed at eliminating the gap and stamping out poverty while maintaining high economic growth.

China is pressed to carry out drastic policy change without delay. For example, a full implementation of the policy package to help the poor presented by the prime minister at the NPC requires massive funding of several trillion yuan (hundreds of trillions of yen).

But the government has yet to secure a source of revenue to finance the project. It faces two choices: It could tackle radical reforms of the income distribution system, even if it means achieving a lower growth rate, or it could be content with partial prosperity and find itself in a pitfall of nationwide social confusion. China stands at a crucial turning point.(IHT/Asahi: May 17,2002)

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The author, born in China, is an assistant manager and economist of Norinchukin Research Institute Co.