Coronavirus: China’s income inequality could expand in 2020 as outbreak rattles world’s No 2 economy

Income inequality in China could expand in 2020 as the impact of the coronavirus outbreak ripples through the economy

Poor Chinese are likely to be disproportionately hit, both in terms of lost earnings and their ability to withstand risk, a new survey shows

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The coronavirus has caused wide-ranging economic disruption in China that could exacerbate income inequality. Illustration: Perry Tse

Published: 12:00pm, 17 Mar 2020Updated: 3:42pm, 19 Mar 2020

For years, China has been trying to reduce the gap between rich and poor, but those efforts could be undermined by the coronavirus outbreak that has shaken the world’s second largest economy.

About a third of Chinese households earning annual incomes of between 10,000 yuan (US$1,426) and 30,000 yuan expect their earnings to drop significantly this year, compared to 11 per cent of high-income households taking home more than 200,000 yuan (US$28,500) per year, according to a February survey conducted by Gan Li, professor of economics at Texas A&M University.

Only 13 per cent of affluent households – or those earning above 1.3 million yuan (US$185,000) per year – believed that the coronavirus would hit their incomes severely, half that of lower-income households earning below 423,000 yuan (US$60,000), said the survey, which tracked wealth across 2,000 households from different income levels.

The survey results, which have not yet been officially published, indicate that income inequality in China could expand in 2020, despite years of effort by the government to close the gap, including lifting minimum wages in less developed regions.

Data released on Monday underlined the wide-ranging economic disruption caused by the virus and containment measures, with industrial production falling by 13.5 per cent over the first two months of the year and retail sales tumbling 20.5 per cent from a year earlier. Analysts warn that China’s economic growth is likely to slow further.

The February survey tapped into a pool of about 40,000 respondents from the biennial China Household Finance Survey (CHFS), which is also led by Gan and a team at Southwestern University of Finance and Economics in western China.

The latest CHFS survey, conducted last summer, also offered clues on how much in savings and other liquid assets Chinese households had to cover basic living expenses, including utilities, food and rent, if their incomes dried up from the virus.

Families that relied on income from temporary work without formal contracts could last 2.3 months, while those with full-time work could survive 5.6 months. Households that owned businesses could last 9.8 months.