Increasing income inequality in China

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Inhibitors:

  1. Governmental policy: If more conservative politicians are moved into the head of state then the country may return to a more Communist policy, or one that will downplay the importance of economic growth.
  2. Backlash to current state of capitalistic countries in global crisis: The Chinese government may revert to more sustainable growth policies after seeing the effects that capitalism has had on other countries during the global financial crisis. Sustainable growth may in turn reverse the growing income disparity.
  3. Social programs: China may give more priority to social security, health care programs, welfare programs, education programs and give more support for rural areas. These measures would help eliminate some of the income disparity within the country. The current Chinese President, Hu Jintao, has been responding to rising social tensions and China's wealth gap by promising greater spending on health and education in rural areas. [6]
  4. Tax reform: China may use high-consumption taxation and legacy taxation as ways to reduce the rich-poor gap.

Paradigms:

Income inequality could have a massive effect on social, economic, and political futures. Most likely, this income inequality will spark changes to social programs such as welfare, social security, health care, and education as reforms in these programs will help eliminate an income gap. This income inequality could also lead to a renewed fundamentalism and return to the Communist ideology where the best interests of the community and equality prevail. Or conversely, the increased income inequality could lead to a push for democracy.

More extreme scenarios could also result from this driving force. The widening gap between the rich and poor cities could result in a multi-level urban society and cause confrontation between different groups. These problems could breed more unstable factors which could endanger social stability and public security, eventually leading to civil war.

Experts:

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

Timing:

  • 1977-2006 - The absolute number of poor in rural areas declined by 91% in the last three decades, dropping from 250 million in 1977 to 21.5 million in 2006. [9]
  • 1990-2004 - The poverty ratio declined from 33% in 1990 to less than 10% in 2004. [9]
  • 2003 - President Hu Jintao is elected by the National People's Congress
  • 2004 - China's Gini coefficient hit 0.465 in 2004 [7]
  • 2006 - In 2006, the income of urban residents was 3.28 times that of their rural counterparts. China’s Gini coefficient, a measure of income disparity, is 0.44 (the closer the coefficient is to one, the higher the inequality) against the 0.10 prevailing before 1978.[9]

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
  6. BBC News. 2009. Country profile: China.
  7. China Economic Net. 2005. How to interpret Gini Coefficient in China
  8. South China Morning Post. 2001. Growing income disparity ‘threatening development’
  9. Wall Street Journal. 2007. Income disparities persist in China.


Revision History:

  1. "Elimination the gap between poor and rich in China" created by Btchoi2 on 16-11-2005
  2. "Renamed "Increasing income inequality in China" and updated by Johanna Little 18-09-2009
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