Corruption blurs China's goal of harmonious society

By Langi Chiang

PUYANG, China (Reuters) - It's in poor places like Puyang that the ruling Communist party's battle to narrow China's yawning wealth gap will be won or lost.

Many residents of this county town about six hours' drive south of Beijing say their lives have improved thanks to tax cuts and increased spending on education, medical insurance and welfare.

But not everyone is content. Puyang, nestled in the northeastern corner of Henan province, is a study in contrasts.

Neat two-storey or three-storey houses stand next to run-down red-brick cottages whose inhabitants struggle to make ends meet.

"The rich are getting richer and the poor are getting poorer," said Li Weibo, a taxi driver in his late 30s.

The most extravagant buildings in town, as is often the case across China, are the offices of the local authorities, which in Puyang are so grand that townspeople call them "the replica of Tiananmen" after Beijing's massive main square.

It cost 32 million yuan ($4.4 million) of government funds to put the buildings up, a sum that raised eyebrows in the poor rural town especially when the official Xinhua news agency reported that 18 local officials were punished last June for improperly tapping public funds to construct them.

The symbols of abuse of power and inequalities -- if not downright corruption -- on display in Puyang are a direct challenge to President Hu Jintao's goal of spreading wealth more evenly and so forging a "harmonious society".

Indeed, the ruling Communist Party has warned that its grip on power could come under threat unless graft is checked.

A national audit in 2006 unearthed misuse of 46.88 billion yuan of government funds, down 53 percent from the year before.

Corruption and the growing wealth gap have prompted some experts, including Professor Wang Sangui, a specialist in rural development at Renmin University of China in Beijing, to suggest the government make tackling corruption as much a priority as boosting social spending.

"It's equally important to establish a system to hold people to account," he said.

Wu Jinglian, one of China's foremost economists, added: "Power leads to corruption. That's an undeniable truth. So how then do we restrict power? We have to depend on the rule of law."

TAX CUTS?

Some economists suggest the government cut taxes rather than increase public spending so that more money is left in the pockets of the people instead of going into state coffers.