China Economy

China wealth gap continues to widen, survey finds

PUBLISHED : Monday, 10 December, 2012, 11:22am
UPDATED : Monday, 30 May, 2016, 5:01pm

The chasm between China’s rich and poor has widened to alarming levels, according to survey results released by the Survey and Research Centre for China Household Finance.

The survey, released on Sunday, reported a rise in China’s Gini coefficient, a key yardstick of income or wealth inequality, to 0.61 in 2010, the latest year for which there is data on China.

That number is significantly higher than the global average of 0.44 and 50 per cent above the "risk level" for social unrest, the Beijing Times reported. 

The figure was 0.56 for urban households and 0.60 for rural households.

Measured on a scale of 0 to 1, a Gini coefficient of 0 represents perfect equality in which everyone has the same income, and 1 represents maximal inequality in which just one person holds all the wealth.

Since China first published data on the Gini-coefficient in 2000, the official figure has stayed level at 0.412. In 2005, the World Bank put the figure at 0.425, the last year it published a Gini index for the country.

Li Shi, executive dean of Beijing Normal University’s China Institute of Income Distribution, who compiled his own Gini survey in 2007, told Bloomberg News in September that a poll of 20,000 households gave an index of 0.48.

“A high Gini coefficient is a common phenomenon in the process of rapid economic development. It is the natural result of the market allocating resources efficiently,” said Gan Li, the director of the research centre, at a briefing in Beijing.

“Relying on market forces alone can’t narrow the gap so China must change the structure of income distribution and rely on massive fiscal transfers to narrow the yawning disparity.”

Gan recommended the government channel its high fiscal revenues and profits from state-owned enterprises to bolster education to “reduce inequality of opportunity to those in the lower income gap".

Pan Jiancheng, from the National Bureau of Statistics' China Economic Monitoring and Analysis Centre, said solving the problem of uneven distribution of income would require greater urbanisation and economic restructuring in the form of higher social spending.

The survey also revealed an urban unemployment rate of 8.05 per cent in July 2012, nearly double the country’s official figure. Unemployment among migrant rural workers rose twofold from 3.4 per cent in July 2011 to nearly 6 per cent a year later.

For university graduates, unemployment prospects have been worse, with fresh graduate unemployment at 16.4 per cent.

The survey, conducted on 8,438 households and 29,500 individuals, was set up by the Finance Research Institute of the People’s Bank of China and Southwestern University of Finance and Economics.

Amidst the country's slowing economic growth, Beijing has become increasingly wary of the country’s yawning wealth gap out of fear that a large enough gap could spark social unrest in the country of 1.3 billion people.

Chinese President Hu Jintao recently set a target to double national per capita incomes by 2020. New Communist Party chief and incoming president Xi Jinping has also pledged to take a harder line on corruption, dealing with economic reforms and improving social equality.

The figure for Hong Kong, which is not included in China's Gini coefficient, stood at 0.537 in 2011, up from 0.525 just one decade ago, reflecting a similar and growing divide between the rich and poor.

Additional reporting from Bloomberg