Inequality: China Keeps Gini in Bottle

While authorities reluctantly prepare to cough up formerly hidden data on air quality, Caixin reports on other figures the government has preferred to keep to itself. China’s Gini coefficient, a key measure of income inequality, has not been made public since 2000, with officials blaming inadequate data.

“The idea that our government can’t use inaccurate information is an excuse for refusing to release the Gini coefficient,” wrote China Europe International Business School Professor of Economics and Finance Xu Xiaonian on the microblogging platform Sina Weibo. “The government could release Gini Index based on the current data and revise it later ….”

Estimates of China’s Gini coefficient over the past ten years are few and far between. According to the United Nations Human Development Report, China’s Gini index in 2001 was 0.447. A 2005 report from the Chinese Academy of Social Sciences said the Gini coefficient was nearly 0.47 in 2005 ….

“When the Gini coefficient reaches around 0.5, it means the inequality problem is extremely severe and needs immediate action to bring it down,” Party School of the Central Committee of the Communist Party of China Senior Economist Zhou Tianyong told the China Daily in 2010.

But inequality is not purely a matter of income. Factors such as household registration and wealth of personal connections are also contributing to a social petrification which, according to Tsinghua sociology professor Gu Yuhua, “will inevitably lead to the rich getting richer and the poor poorer, the strong permanently strong and the weak permanently weak.” Also from Caixin:

In opportunities for education, employment, promotions and overall improvement of their lives, people are discovering that society’s resources and opportunities are increasingly concentrated in the hands of a few. People in the middle and lower strata of society are becoming increasingly marginalized and are finding that improving their lives is getting harder.

The 2004 China Social Mobility Report published by China Academy of Social Sciences said that people whose fathers have power or capital have an easier time becoming party cadres than people in general. Research into the changes in private businesses ownership after 1993 showed that the elite in non-business fields were more likely to own businesses today. Thus, opportunities for common people to start private businesses are fewer and fewer. It is exceedingly difficult for farmers moving to a city to find success. The registered permanent residence system and economic factors conspire to make this move very difficult.

Last year, The Economist examined the difficulty of using sibling comparisons to measure social mobility, as is common elsewhere, in a country with a “one-child” policy. At The New Yorker, Evan Osnos wrote about authorities’ attempts to paper over inequality by restricting luxury ads and supercar funeral convoys.

The Party knows that this is not an abstract problem. In 2001, then-Premier Zhu Rongji was asked if he worried that the deepening divide could cause social unrest. “Not yet,” Zhu said, and pointed to the measurement of income disparity known as the Gini coefficient. China was fine, he said, as long as it did not reach a “danger level” of 0.4.

In 2006, on the other hand, Tsinghua economist Wei Jie argued at People’s Daily Online that the Gini Coefficient was not as applicable to China’s circumstances as to those of more developed countries:

It is true that the Gini Coefficient reflects information of different income groups. But the analysis of income gap is a different concept from the analysis of the influence of the income gap.

Countries, which have finished the urbanization process and industrialization process, enjoy social stability and economic rise under a Gini Coefficient of 0.3-0.4. Those with a Gini Coefficient higher than 0.4 have too large an income gap and suffer from a sluggish economy and serious social problems. In these cases, the criteria and analysis of income gap overlaps with that of the impact of income gap.

In China’ case, however, where urbanization and industrialization are far from being finished and urbanization lags far behind industrialization, criteria applied to economies which have completed the processes may not work well.

January 19, 2012 5:06 PM
Posted By: