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China’s Income Gap Narrows to Level That Still Risks Unrest

January 18, 2013

China Income Gap Narrows While Staying at Levels Risking Unrest

Pedestrians walk along a street in the Shangdi area of Beijing, China. Photographer: Tomohiro Ohsumi/Bloomberg

China’s income gap narrowed for the fourth straight year in 2012, the country’s statistics chief said today, the first time in a more than a decade the government has released the politically sensitive figure.

The nation’s Gini coefficient was 0.474 in 2012, down from 0.491 in 2008, Ma Jiantang, head of the National Bureau of Statistics, said at a briefing in Beijing to release last year’s economic data. The figure has exceeded 0.4, the level used by analysts as a gauge of the potential for social unrest, for the past decade, the data show.

The new generation of Communist Party leaders who took power in November have highlighted the need to narrow China’s income gap and boost consumption as they wean the world’s second-biggest economy off a dependence on investment. Reducing inequality is one of the main challenges facing the nation, the World Bank said in a February 2012 report.

“The income gap may have narrowed in recent years, but it’s still too early to say that the narrowing is a trend,” Li Shi, executive dean of Beijing Normal University’s China Institute of Income Distribution and a government adviser, said in a phone interview. “The number is close to what others have calculated about China’s income gap.”

Until today, the last national Gini coefficient number from the government was for 2000, when the figure was 0.412. Bo Xilai said in March, before he was ousted as Communist Party secretary of Chongqing, the level had exceeded 0.46.

Rich, Poor

The decline since 2008 reported today contrasts with the U.S., where the income gap between rich and poor grew to the widest in more than 40 years in 2011. U.S. Census Bureau data released in September showed the measurement rose to 0.463 from 0.456 in 2010. The figure has risen steadily from its 1968 low of 0.351.

The Gini index ranges from 0, which represents perfect equality, to 1, pr perfect inequality. Readings above 0.4 are used by analysts as a gauge of the potential for social disturbances. The index is also measured on a scale of 0 to 100. Ma said his agency arrived at the figures by using a new approach to review historical statistics tracked back to 2003.

“The data showed that we must speed up income distribution reform and that we urgently need to narrow the income gap,” Ma said at today’s briefing in Beijing. “On the one hand, we must make the cake bigger, and on the other hand, we must do a better job in sharing the cake.”

Ma said Gini figures for 2009 for countries with similar development levels to China showed Mexico at 0.48, Argentina at 0.46 and Russia at 0.4.

Good News

While the narrowing shown in today’s data is “good news,” China’s wealth gap continues to widen as property prices rise and homes become less affordable for migrant workers, Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong, said in an interview today.

“If migrant workers want to settle in Chinese cities it’s getting much more difficult than before and it’s a big barrier for urbanization,” Lu said. “How can they afford to rent or own a home in urban areas?”

A private survey of 8,438 Chinese households, backed by China’s central bank, concluded the country’s Gini coefficient was 0.61 in 2010. The World Bank put the figure at 42.48 for 2005, the last year it published an index for the country.

Asked to comment on the disparity between the government’s figures and the survey, Ma said both official data and private surveys are “part of the statistics system and serious private surveys should be an important and good supplement to government data.”

Gini Readings

The statistics bureau’s Gini readings were greeted with skepticism by economist Xu Xiaonian, previously head of research at Goldman Sachs Group Inc.’s China venture Gao Hua Securities Co.

“That Gini coefficient is, to quote Zheng Yuanjie, even wilder than a fantasy,” he wrote on his verified account on Sina Corp.’s Weibo microblogging service, referring to a Chinese writer of fairy tales. Xu is a professor of economics and finance at the China Europe International Business School.

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net; Kevin Hamlin in Beijing at khamlin@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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