Economy

China's Income-Inequality Gap Widens Beyond U.S. Levels


The gap between China’s rich and poor is now one of the world’s highest, surpassing even that in the U.S., according to a report being released this week by researchers at the University of Michigan.

The metric used in these studies, the Gini coefficient, would be zero in a society in which all income is equally distributed, while a score of one would reflect a society in which all income is concentrated in the hands of a single individual. Over a three-decade period starting in 1980—shortly after China’s economic reform and opening commenced—the Gini coefficient has grown from 0.3 to 0.55 in 2010.

In the U.S., by contrast, the index reads 0.45. Anything over 0.50 is considered “severe disparity,” says the report in the Proceedings of the National Academy of Sciences. The authors used data from seven separate surveys conducted by a number of Chinese university-affiliated organizations, including Peking University’s Institute of Social Sciences.

“Income inequality in today’s China is among the highest in the world, especially in comparison to countries with comparable or higher standards of living,” said University of Michigan sociologist Yu Xie, who co-authored the report.

The official figure given last year was 0.473, slightly down from 0.474 in 2012, according to China’s statistics bureau. That’s still higher than the 0.4 level that the United Nations has said is likely to cause social unrest. “Unfortunately, for a variety of practical and political reasons, government statistics have not been a reliable source of information on income inequality in today’s China,” Xie said.

Income disparity is a sensitive issue in China, which is now experiencing a growing number of protests. A massive April strike over unpaid social welfare benefits by tens of thousands of migrant workers at a Nike (NKE) supplier was one of the largest labor actions in contemporary Chinese history.

“The rapid rise in income inequality in China can be partly attributed to longstanding government development policies that effectively favor urban residents over rural residents and favor coastal, more developed regions over inland, less developed regions,” said Xiang Zhou, a graduate student who co-authored the report with Xie.

At last year’s Third Plenum, top officials unveiled an ambitious reform blueprint that included changes to household registration and land use policies that could boost rural household consumption. If the proposal is successfully implemented—a big if—it would begin to alleviate China’s soaring inequality.

Dexter_roberts
Roberts is Bloomberg Businessweek's Asia News Editor and China bureau chief. Follow him on Twitter @dtiffroberts.

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