Thuy Vu:
Growing concern over the gap between the rich and poor is pushing the government to reform. The State Council has issued guidelines to narrow the income gap. To help us work out how important these guidelines are, and what they might tell us about the new leadership's priorities for China, we have Bob Kapp with us on Skype. Bob used to be head of the US-China Business council. He currently advises American companies on doing business in China and is also on Link Asia's advisory board. It's good to have you on the program again. If you were among China's lower classes, how excited would you be about these proposals from the State Council?

Bob Kapp:
Well, I would be mildly excited but not very because these are only guidelines, they're talking about an improvement in the minimum wage in the country by the year 2015. But there is an awful lot to be done before that is applied to the workforce overall. So, it's an indication that the Chinese regime, the government, understands they've really got a problem on the inequality of income and they need to do something about it. They've known that for years. This is the first time they've at least laid out some guidelines about what they want to do and how they want to get there. But there's a lot of intermediate work to be done. And if I were a worker I'd say let's wait and see how it goes.

Thuy Vu:
Let me ask you this. If these guidelines do what they are supposed to, what does it mean for Americans and some of the economic issues that irritate us about China.

Bob Kapp:
Well, in a very broad long term way it's probably a good thing for us and for our economic relations with China. Because just as the United States since the financial crisis of 2008 has been struggling to readjust its balance of consumption and savings and so forth, the Chinese economy is way out of balance. We tell them that and they know it for themselves. And these measures are at least a small but significant part of the gradual effort by the Chinese to deal with their own rebalancing of the economy and getting more consumption going within the economy. It ultimately will be part of the harmonization of our two economies over a long period of time.

Thuy Vu:
What do these recommendations tell you about the way Xi Jinping and the other new leaders plan to move China? It seems like there is a synergy here.

Bob Kapp:
You know Thuy it's interesting. There's been a lot of discussion both inside and outside of China. Especially in the months leading up to the big party congress last November, about whether China was so wrapped around its own axel now with these big state-owned companies and these wealthy interest groups and these corrupt officials so hand in glove with one another that changing government policy was almost impossible. The vested interest, so to speak had the place in their own hands. This suggests at least the possibility that Xi Jinping, new head of the party will become president of the Chinese government and of China in March, when the National People's Congress convenes, that he actually is going to try to be more activist and decisive bringer about of the kinds of reforms that his predecessors sound so very difficult to enact and practice. His predecessors who are just now leaving have been talking many of these things for six, seven, eight, maybe even ten years since they first took office. But the talk has not turned into serious restructuring because there are so complex layers of vested interests pulling in all different directions. This suggests that perhaps the outgoing guys are handing the baton to the incoming guys who are going to run with it as they just take over. And we'll have to say whether that's true, or whether as has happened in the past they push but then the push back gets so big and so diffuse that at the end of the day they don't really accomplish nearly as much as they would like to.

Thuy Vu:
But in the meantime it seems that there is hope that is no longer just talk but action this time around. Thank you so much, Bob, for joining us.

Bob Kapp:
Great Thuy, LinkAsia's my favorite place.

Thuy Vu:
Well we're happy to have you here thanks so much Bob. Bob Kapp was formerly head of the US-China Business Council, a China scholar and a LinkAsia adviser.