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China’s Income Inequality

Xi Jinping, General Secretary of the Communist Party of China (CPC) Central Committee, President of the People's Congress (CPC), Chairman of the Central Military Commission (CMC) and Chairman of the Central Committee of Finance and Economics (CMC), presided over the 10th meeting of the Central Committee on Finance and Economics on 17 August 2021 to study the issue of promoting common prosperity in a solid way, and to study the prevention and resolution of major financial risks and the development of financial stability. In an important speech at the meeting, Xi stressed that common prosperity is the essential requirement of socialism and an important feature of Chinese-style modernization.

The meeting pointed out that after the reform and opening-up, the Party deeply summarized the historical experience of both positive and negative aspects, realized that poverty is not socialism, broken the shackles of the traditional system, allowed some people and some areas to get rich first, and promoted the liberation and development of social productivity. Since the 18th National Congress of the CPC, the CPC Central Committee placed the gradual realization of common prosperity of all the people in a more important position, taken strong measures to safeguard and improve people's livelihood, won the battle against poverty, built a well-off society in an all-round way, and created good conditions for promoting common prosperity.

The meeting stressed that common prosperity is the prosperity of all the people, the material and spiritual life of the people are rich, not the wealth of a few people, nor is it a uniform egalitarianism, to promote common prosperity in stages. The Party would encourage hard work, innovation and prosperity, insist on safeguarding and improving people's livelihood in development, create more inclusive and equitable conditions for people to improve their education and development capacity, open up the upward mobility channel, create opportunities for more people to become rich, and form a development environment in which everyone can participate and dare to start a business to become rich leaders. It would expand the proportion of middle-income groups, increase the income of low-income groups, rationally adjust high income, and eliminate illegal income. Efforts should be made to expand the size of middle-income groups, grasp the focus, precise policy, and promote more low-income people into the middle-income ranks.

The State should strengthen the regulation and regulation of high income, protect legal income according to law, rationally adjust excessive income, and encourage high-income people and enterprises to return more to society. We should clean up the regulation of unreasonable income, rectify the order of income distribution, and resolutely prohibit illegal income.

The Party is concerned about inequality, which increased over the decades of economic reforms that created a richer and more capitalist society. In 2020, China’s richest 20% had 10 times more disposable income than the bottom 20%. Public concern about the difficulty of getting — and staying — ahead were contributing to serious structural problems, such as a plunging birthrate as parents worry about rising education and property costs. Some young people are adopting passive resistance to an increasingly unwinnable rat race, such as the “lying flat” philosophy, essentially opting out and doing the bare minimum.

Another reason for the Party’s focus on outsize wealth is to reduce rival centers of power and influence in China, which has also been an impetus for its crackdown on the tech sector, a major source of new wealth in recent years. In fact, the regulatory storms it has unleashed since last year have already wiped out a great deal of paper wealth for China’s billionaires.

Wealthy Chinese remain the No. 1 buyers of luxury products worldwide. China's economic boom has made billionaires out of some entrepreneurs, and Communist Party officials seem to live in luxury. However, the majority of China's people have experienced little growth in income. What is the true level of income inequality in today’s China? Scholars continually and heatedly debate this question.

China’s income inequality not only surpasses that of the United States by a large margin but also ranks among the highest in the world, especially in comparison with countries with comparable or higher standards of living. China’s current high income inequality is significantly driven by structural factors attributable to the Chinese political system, the main structural determinants being the rural-urban divide and the regional variation in economic well-being.

The government announced in December 2020 that there would be an end to "absolute poverty" nationwide by the end of 2020. Absolute poverty in China is defined as the level below which people's income and food production aren't able to meet subsistence needs for food, shelter and clothing. But China's nationwide poverty allevation campaign has been linked to forced labor, political "re-education" camps in Xinjiang and Tibet, as well as the mass relocation of traditional communities to take up low-status industrial jobs in cities. The program has sparked concerns among the Yi about the erosion of their communities and their traditional way of life.

China relocated over 9.6 million people to complete its poverty alleviation relocation plan during the 13th Five-Year Plan (2016-2020) period, according to Zhao Chenxin, secretary-general of the National Development and Reform Commission. "9.6 million poor people have all moved to new homes, of which more than five million have been resettled in urban areas and about 4.6 million have been resettled in rural areas," Zhao told a Dec. 3 news conference in Beijing. "The employability of poor people has been significantly improved after their relocation. Relocated families with labor have achieved the employment goal of at least one person, and the income of the relocated people has been significantly improved," he said.

The CCP's anti-poverty drive has brought with it the fear of a uniform, monocultural China aligned with the priorities of the majority Han Chinese.

China achieved world renown in reducing its rural poverty during the past two decades, despite the global slowdown in poverty reduction. Contributing to this success are a series of policy and institutional reforms, promotion of equal access to social services and production assets, and public investments in rural areas. Yet, as China‘s economy continues to grow, it is becoming harder to reduce poverty and inequality further. Since its beginning in 1978, China’s economic reform has led not only to rapid economic growth but also to a large increase in economic inequality. Although scholars continue to debate about precise estimates, the consensus is that income inequality in China has now reached a level much higher than that in the United States.

Health inequality has been recognized as a problem all over the world. In China, the poor usually have less access to healthcare than the better-off, despite having higher levels of need. Since the proportion of the Chinese population living in urban areas increased tremendously with the urbanization movements, attention has been paid to the association between urban/rural residence and population health. It is important to understand the variation in health across income groups, and in particular to take into account the effects of urban/rural residence on the degree of income-related health inequalities.

China’s higher educational development and school expansion has increased dramatically since 1999. The total number of enrollments increased from 6.42 million in 1998 to 31.05 million in 2010, raising the gross enrollment ratio from 9.8% in 1998 to 26.5% in 2010. Some findings show the inequality of higher education has improved with the increase of educational supply, especially for females and people with lower socioeconomic status and residents from rural communities.

Those students from the western minority regions (e.g. Qinghai, Tibet) and parts of municipalities (e.g. Beijing, Shanghai) have higher probability of entering a central subordinate university than those from central provinces, which have a higher population but only a few higher education institutions.

Chinese college students are dissatisfied with entrance opportunities for higher education. Subject to the regulations of the National Education Ministry, high school graduates must take the college entrance examination in their place of household registration location. The difference between the total number of candidates and quota distribution among regions leads to the inequality of educational opportunities.

Relative deprivation emphasizes the individual’s dissatisfaction caused by social comparison relative to a reference group. Relative deprivation has a significant effect on individual’s dissatisfaction compared to unequal quota distribution. College students’ dissatisfaction was caused by the fact that they realized they could not get a fair distribution comparison to their reference groups.

The the International Food Policy Research Institute study found that agricultural research investment had the largest impact on agricultural production growth, which is much needed to meet the increasing food demands of a richer and larger population. Agricultural production growth also benefited the poor economically. To reduce rural poverty and promote rural economic growth, the government should not only increase agriculture-specific investment, such as agricultural R&D, but also gear broader investments, such as those on education and infrastructure, to rural areas. Government expenditure on education had the largest impact on reducing both rural poverty and regional inequality and a significant impact on boosting production. Increased rural nonfarm employment accounted for much of this poverty and inequality reduction.

The Gini coefficient for family income in China has now reached a level above 0.5, compared with 0.45 in the United States in 2010. This finding is significant because China had a very low level of income inequality as recently as in the late 1980s. Ordinary persons in China know about this increase, as they have personally experienced it in their own lives. Although ordinary Chinese people seem to tolerate the high inequality, they also recognize it as a social problem needing to be addressed. In fact, out of a number of social issues given, respondents in a 2012 national survey rated economic inequality (more precisely, the “rich-poor gap”) the most severe, above corruption and unemployment.

For a variety of complicated reasons, ranging from politics to practical difficulties, government statistics on Chinese well-being have been questioned for their accuracy. This concern is exacerbated by the long-standing concealment practices of China’s National Bureau of Statistics (NBS), responsible for constructing and relea sing government data on China, such that no original microlevel data are accessible to any independent researcher that could be used to corroborate the macrolevel statistics it releases.

In the case of income inequality, the NBS stopped releasing the Gini coefficient after it reached 0.41 in 2000. It was not until an economist claimed that the Gini coefficient had reached the shockingly high level of 0.61 that the NBS, in early 2013, released the Gini coefficients for recent years, which were slightly under 0.5.

Ma Jiantang, chief of the National Bureau of Statistics, told a news conference January 18, 2013 that figures from 2003 to the present showed "the income gap was rather big." The NBS used the "Gini coefficient" - a standard measure of economic inequality to measure the gap. The index ranges from 0 - perfect equality, to 1 - total inequality. Jiantang told reporters that China's coefficient stood at 0.474 last year, placing the country among some of the world's most unequal societies.



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Page last modified: 18-08-2021 13:51:32 ZULU