China Lets Gini Out of the Bottle

China has not made its Gini coefficient public since 2000. The Gini coefficient is a measure of income inequality, ranging from 0, or perfect equality, to 1, or perfect inequality. A figure above 0.4 is widely believed to indicate potentially destabilising inequality. A recent survey suggested that China’s Gini coefficient was higher than other estimates at an unnerving 0.61, but Chinese state media reports that it stood at a more moderate 0.474 in 2012. From China Daily:

Known as the Gini coefficient, the index has been retreating gradually since hitting a peak of 0.491 in 2008, dropping to 0.49 in 2009, 0.481 in 2010 and 0.477 in 2011, Ma Jiantang,director of the National Bureau of Statistics, told a press conference.

The index stood at 0.479 in 2003, 0.473 in 2004, 0.485 in 2005, 0.487 in 2006 and 0.484 in2007, Ma said, citing NBS calculations.

The Gini coefficient has stayed at a relatively high level of between 0.47 and 0.49 during the past decade, indicating that China must accelerate its income distribution reform to narrow the rich-poor gap, Ma said.

“After the financial crisis in 2008, China’s Gini coefficient gradually dropped from the peak of0.491 that year as the government took effective measures to bring benefits for its people,” Ma said.

The World Bank also issues Gini coefficient findings, but has not done so for China since 2005, Reuters reports:

“We should improve our efforts to divide the cake. When we are building our ‘well-off’ society, we should not only double people’s average income and GDP, but also better distribute the national wealth and give mid-to—low income residents a bigger part of the pie,” Ma said, echoing policy priorities among some fiscal reformers.

Ma said the World Bank put China’s Gini coefficient at 0.474 in 2008. The World Bank’s last published figure – 0.425 – was for 2005.

A recent survey by a Chinese university in Chengdu, the Southwest University of Finance and Economics, put the country’s Gini coefficient at 0.61 in 2010.

China has 2.7 million U.S. dollar millionaires and 251 billionaires, according to the Hurun Report, but 13 percent of its people live on less than $1.25 per day according to United Nations data. The average annual urban disposable income is just 21,810 yuan ($3,500).

Critics are skeptical of the new official numbers, the South China Morning Post reports:

“A reporter called and asked me to comment on today’s data, but wouldn’t I be crazy to comment on a fake figure?” said Xu Xiaonian, a respected economist and professor at China Europe International Business School onhis Weibo, China’s twitter-like service.

“Speaking of our Gini coefficient, even in fairy tales they wouldn’t dare to write like that,” Xu said.

“Haven’t we always lived in a fairy tale?” commented a netizen.

“All the rich people have emigrated and that’s why our Gini coefficient is declining,” said another.

Due to the yawning gap between rich and poor, some have called the numbers the “Lamborghini” coefficient, but Bloomberg reports that the apparent narrowing of the income gap is ‘good news’:

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.

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.

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?”

According Al Jazeera, estimates of the figures have varied, and inequality may have increased between urban and rural areas:

However, Professor Martin Whyte, a sociologist at Harvard University who has carried out research on attitudes towards inequality in China, said he found the figure of 0.61 hard to believe. “The best survey research on income gaps leads to the same conclusion that the figure [Gini coefficient] is rising but is nowhere near these sort of figures,” he said.

Inequality may also have increased between the country’s wealthy east coast, where the major cities of Shanghai and Beijing are located, and the rural interior. Earlier this year, the gap between urban and rural areas was highlighted with the news that students in an area of Hubei Province had to provide their own desks for school, in stark contrast with the air-conditioned schools in the country’s largest cities. The gap between urban and rural incomes is about 26 percent higher than in 1997 and 68 percent higher than in 1985, according to a report by the Chinese Academy of Social Sciences.

In an article for the Economic Observer, Sun Liping, a professor at Tsinghua University, reffered to research estimating that there were 180,000 protests, riots and other mass incidents in China in 2010. However, it is not known if any were directly related to income inequality, and Gan said he had found no evidence that the figure of 0.4 was a warning line for social unrest. But he added: “There is lots of research saying that it is not income inequality per se that affects social instability, it is unequal opportunities. If there [are] vastly unequal opportunities, people will feel unsatisfied.”

While income inequality is a major issue for Chinese citizens, commuters in Shanghai had confidence in the Chinese government’s ability to solve the problem. “There is now a limitation of the top salary,” said Sun Xue Hong “For the poor, the government is trying to increase their salary at the same time. So this way the gap can become smaller and smaller.”

Aside from addressing the Gini coefficient, Ma also stressed the drop in the nation’s working-age population, a shift which could have an impact on China’s family planning policy and economy:

What he went out of his way to stress was the drop in the nation’s working-age population, covering those between 15 and 60 years old. The total slipped by 3.45 million over the year to 937 million. That’s still a huge number, but Mr. Ma noted it was the first absolute drop in many years.

Asked whether the new numbers might mean it’s time for a change to the one-child rule, Mr. Ma moved ahead slowly. “As the statistics bureau chief, I am actually not well positioned to comment on our one-child policy,” he said, before adding he would like to express some of his own thoughts.

“After decades of population control, we are seeing some changes in labor force demand and supply, though the change is preliminary. To respond to the change, I think it’s appropriate to research a more proper, scientific policy while insisting on control measures.”

He also said perhaps “there could be a flexible adjustment in the way we employ people and the limits on the working age.” In a belated acknowledgement of the sensitivity of the issue, that remark later disappeared from the online transcript of the news conference.

See also CDT Money: Uncertainty Looms in 2013, via CDT.