International experience suggests thatthe effect of globalization on economic growth, poverty andincome distribution can vary significantly among countries,and that its impact depends crucially on national policies.This report assesses the possible patterns of inequality inChina in the future, and outlines policy options that couldhelp accomplish China's objective of growth withequity. For sustaining growth, the report emphasizes thefreer flow of resources and goods and services in theeconomy, to be achieved by domestic market integration andflexibility. The report suggests that the cost ofmarketfragmentation and rigidities is high, and highlightsmeasures to reduce local protectionism, facilitatemigration, and commercialize the banking sector. To optimizethe results of domestic market integration and promotegrowth with equity, the report proposes a package of policyactions that would promote new job opportunities, especiallyin the less developed regions, and raise returns on farmlabor and land. Among these, the report highlights investingin people, promoting the diffusion oftechnology,facilitating urban agglomeration, expanding services andenhancing farmers' prospects. Finally, the reporttackles the social, economic and fiscal risks that maythreaten future growth and distributional performance. Inparticular, it suggests extending different types offormalsocial security in both urban and rural areas, for fixingthe inter- government fiscal system in order to facilitatethe provision ofpublic services, and for managing fiscalrisk beyond the government budget and officially recognized debt.
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