Increasing income disparity in China

Description:

With the undertaking of many market reforms China has achieved sustained high growth and rapid progress in poverty reduction. The World Bank estimates that in the last two decades since reforms started average income per capita in the country has quadrupled and more than 270 million people have been lifted out of poverty. The dark side to these statistics lies in the current income disparity in the country.[1]

As of 2007, China had a Gini coefficient of 0.447.[2] This income disparity can be seen between farmers and city dwellers and between the employed versus unemployed in the cities. The pace of the poor's growing affluence is by far slower when compared with the richer portion of China. Much of this income disparity has been caused by economic growth and migration to cities as there is a large gap between the country's urban and rural areas and between the booming coastal regions and underdeveloped western regions. This results in a multi-level society which could eventually lead to democracy or civil war.

Enablers:

1. Income disparities between different areas and industries: Urbanites and those working in government monopolistic sectors, for example telecommunication and banking, generally earn much more than farmers and city dwellers in non-monopolistic industries. [3]
2. Discrimination against different social identities: In China today, seldom can farmers gain an equal footing while competing with their urban counterparts in job-seeking. Such discrimination also further pushes farmers to a disadvantageous corner while they try to elevate themselves through other means, for instance education and vocational training. [3]
3. Economic growth:
4. Improved transportation structure: As the transportation structure in China improves, more people are able to move to the city in work which increases the income disparity between city workers and farmers.
5. Increased number of households: An increase in the number of households makes more homes available for people to move into in the city. Moreover, the increase in the number of households is also contributing to the development of a more individualistic mentality and a decrease in collectivism. This decrease in collectivism further excerbates the income disparity issue as more people are concerned about their own success rather than the success of the community.
6. Government policy favoring economic growth: Income disparity worsens as the government continues to implement policies and programs that favor economic growth.
7. Elections of moderate factions of Communist Party: Moderate politicians move the focus from Communism to economic growth. The last two heads of state have been from the moderate party and have emphasized economic growth over Communism, leading to increasing income disparity.
8. Increasing education levels: As educational opportunities increase so does the rise of "blue collar" and "white collar" classes.

Inhibitors:

1. Governmental policy:
2. Backlash to current state of capitalistic countries in global crisis:
3. Social programs: Must give priority to reform of taxation, social security, and more support for rural areas. Measures include building a framework for helping poor citizens and measures to help those unemployed.<
4. Tax reform: Considering collecting high-consumption taxation and legacy taxation as ways to reduce the rich-poor gap by
   the Chinese government.

Paradigms:

Two types of inequality will have a massive effect on social, economic, and political futures. This inequality could lead to democracy or civil war. It could lead to renewed fundamentalism and a return to the Communist ideology. Or it could spark changes to public health care, welfare, education, and other social programs.

1) Adopted the policy of reform and opening to the outside world.
2) The country's per capita GDP has increased by five times. Currently, China is pushing for urbanization as part of its modernization bid. If the rich-poor gap continues to grow,
it will hinder the development of Chinese cities. This will get the below problems
1)A widening gap between the rich and poor in cities may result in a multi- level urban society and cause confrontation between different groups.
2)The problem could breed more unstable factors which could endanger social stability and public security.

Experts:

http://www.mof.gov.cn/index.htm
http://www.mof.gov.cn/english/english.htm

Timing:

The 2008 Olympic Games in Beijing

Web Resources:

1. Qin, Cagas, Duncanes, He, & Liu. 2005. Income Disparity and Economic Growth: Evidence in China.
2. Poon, A. 2007. China's Gini Coefficient and Market Economy
3. People's Daily. 2002. China Urged to Heed Enlarging Income Disparity.
4. http://www.xinhuanet.com/english/index.htm
   
5. http://www.btmbeijing.com/contents/en/business/2005-09/focus/chinaamendtaxlaws