( CNN ) -- The challenge facing the next generation of the Chinese leadership is steering the nation as it moves from an export and investment driven economy to a more sustainable consumption-driven economy . However , such transformation will not be easy . Over the last two decades , various measures to encourage Chinese consumption had limited success . The expansion of higher education since mid-1990s was one early attempt . While a success in matriculation -- 19 % of Chinese under the age of 30 have a college degrees -- the move failed to spur consumption as families instead saved to afford university educations . A similar story can be seen in the commercialization of the housing market . Families have to save increasingly more in order to afford apartments with rising prices . Given the spotty success of Beijing policy to boost consumption , new research suggests the key may lie in tackling China 's growing divide between the rich and the poor . Read more : Why China needs to learn the three R 's . The government has never publicly released household-level data necessary to study this problem . To gauge the scope of the problem , my colleagues and I at China Household Finance Survey conducted a nationwide survey , interviewing a random sample of 8,438 households in China , both rural and urban . We found that the top 10 % of Chinese households garnered 57 % of total income and 85 % of total assets -- a concentration level of income and wealth that surpasses those of developed countries , and can only be found in some of the African countries such as South Africa and Seychelles . Income inequality is the key reason for China 's low consumption rate . The rich hold the vast majority of Chinese savings . The top 10 % of households have 69 % of the total savings , and average saving rate for these households is a staggering 60 % . Conversely , about half of the Chinese households surveyed have negligible savings . Therein lies the dilemma for Beijing 's new leaders as they try to make Chinese consumers , not exports , the key driver of China 's economy . Why ? The data suggests China 's rich are already spending what they need , and pocketing most of the rest . The low savings rate of most Chinese households surveyed suggest they simply do n't have the money to spend . To move toward a consumer-based economy , therefore , raising the income -- and spending -- levels for the poor is key . Read more : Why China wo n't turn the other cheek over foreign policy . Here the next generation of Chinese leadership can and should play a significant role . Typical thinking is to attack the problem from the income side by increasing the tax on the rich and redistribute it to the poor . Chinese policymakers are working in a similar vein . Beijing plans to issue new guidance on income redistribution in December . Although information on this measure is still limited , it is likely to focus on the income side by regulating market wages -- a disappointment if it were true . Additional regulation will not only create market inefficiencies , it simply may not work -- if the past is any example , firms will find ways to circumvent regulation . An effective approach to reduce the inequality and to boost consumption , however , is to shift government spending priorities away from massive infrastructure development -- roads , railroads and airports -- and toward social welfare investment . Studies have shown that spending on social welfare can have a substantial effect on consumption . In the case of health insurance , each one dollar the government spends would increase consumption by $ 2.36 dollars for rural health insurance or $ 4.16 for urban employee health insurance , according to a series studies by my colleagues and I did in 2010 . Although 90 % of Chinese population is currently covered by three basic health insurance systems , benefits differ substantially across the three systems because of different levels of contributions made by the government to the insurance premiums . Government should bring up the benefit level of the rural insurance to that of urban insurance . Another important area that government can do is to establish an effective unemployment insurance system . So far , the coverage rate of the unemployment insurance is only 30 % of that of health insurance . It also pays too little : unemployment benefit is only 17 % of the average salary compared to 47 % in the U.S. and 60 % in Germany . Given the challenges ahead , China 's new leadership should view this with some urgency : When the economy is in transition , unemployment rate will likely rise and more people will need help . Read more : Why China 's reforms have hit a brick wall . Unfortunately , Chinese government has not given up the idea of spending on massive infrastructure projects to remedy its economic problems . Over the last 10 years , government spending on social welfare programs is only about 3 % of the total spending . If the government creates a stronger social safety net for its citizens , Chinese workers will feel less pressure to save for health emergencies , unemployment and retirement , and more likely to buy goods and services -- and create a mature consumer-driven economy . The opinions expressed in this commentary are solely those of Li Gan .
Key challenge for China 's leaders is moving to a consumption-driven economy . Measures to encourage Chinese consumption have had limited success . Research shows top 10 % of Chinese households garnered 57 % of total income . Gan : Income inequality is the key reason for China 's low consumption rate .