China's income inequality slowly improving, survey finds

New survey claims key measure of income gap has slightly improved, but earlier studies suggest the problem could be getting worse

PUBLISHED : Friday, 19 July, 2013, 12:00am
UPDATED : Friday, 19 July, 2013, 5:17am

Wealth inequality in China is still high compared with most developed countries but the gap is slowly narrowing, a new survey has found.

China's Gini coefficient of income inequality was 0.49 last year, slightly down from 0.51 in 2010, according to the China Development Report on People's Livelihood 2013 based on the China Family Panel Studies.

This is a research project of the Institute of Social Science Survey at Peking University.

The study's researchers interviewed 14,960 households representing 57,155 people.

The Gini coefficient is a measure of income inequality. A figure of 0 represents perfect equality and 1, perfect inequality. A reading above 0.4 is seen as a warning sign of inequality.

"Two reasons contribute to China's improving Gini index," Ren Qiang, an author of the report, said. "One is the faster increase in household income in rural areas compared with the cities, and the second is the faster income rise of the middle class.

"China's Gini index is higher than most developed countries like the US or Europe, but we are still better than countries in Latin America and Africa."

But Gini index estimates vary among different sources.

In January, the National Bureau of Statistics released index figures for the past decade: in 2010 it stood at 0.481, and last year it was 0.474. The World Bank put the 2009 figure at 0.421.

Another survey released in December by the Survey and Research Centre for China Household Finance at the Southwestern University of Finance and Economics estimated China's Gini index for 2010 to be an alarming 0.61.

"We reached many wealthy families in our survey and our refusal rate was quite low," said Ma Shuang, a researcher on the Southwestern University survey, when asked to explain its higher Gini index reading.

Despite a softening Gini index, the China Family Panel Studies figure also confirmed a staggering income gap, with the top 5 per cent of households' income last year being 234 times that of the lowest 5 per cent, whose annual per capita income was about 1,000 yuan (HK$1,250).

The survey also found that 87.4 per cent of households owned or had equity in housing properties and that nearly 80 per cent owned at least one house or flat. More than 10 per cent owned more than one property.

"China's ratio of private housing ownership is higher than many other countries, but this might not be a good trend," Ren said. "China should introduce property taxes and other measures to discourage people using property as their major investment vehicle."