Reform of Income Distribution and the Social Insurance System

  • Shangquan Gao
Part of the Studies on the Chinese Economy book series (STCE)


In order to encourage increased production and provide workers with an incentive to step up their output, piece rates and a bonus system were introduced in 1979. Since 1983, instead of turning over all their profits to the state, state-owned enterprises have been taxed and the bonuses have been drawn from profits left over after taxation. In 1984 there was no upper limit on bonuses but enterprises whose annual bonus was equal to or below two and a half months’ standard wage were exempt from bonus tax, while those whose annual bonus was above the quota were taxed gradationally. In 1985 the starting point of bonus taxation was raised from the equivalent of two and a half months’ standard wage to four months, and from the end of 1986 to the begin- ning of 1987 the rate of the bonus tax was reduced.


Income Distribution Piece Rate Social Insurance System Collective Enterprise Wage System 
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© Shangquan Gao 1996

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  • Shangquan Gao

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