The NBS says the annual disposable income of the richest 10 percent of urban residents was 43,000 yuan in 2008, much lower than my research result of 139,000 yuan. The number in 2011 was 59,000 yuan, which hardly explains what we see today – high housing price in cities, rapidly expanding private car ownership, a total of 35 trillion yuan in private bank deposits, the flow of private funds overseas and the zeal for luxury goods shown by Chinese traveling abroad.

Bureau head Ma Jiantang said that “we feel that our urban Gini coefficient reading based on a survey of urban residents is too low. The main reason is it’s hard to access the true figure for the high-income group.”

The problem is two-fold. Many high-income residents do not want to take the survey, and the NBS cannot guarantee that their substitutes have the same level of income, a situation that eventually causes part of the high-income group to be omitted. And those high-income survey-takers do not necessarily provide a full picture, especially when they have significant grey income, or income from extralegal sources. Therefore, the result based on reported income is lower than reality.

Gaps in income between the highest and lowest levels of Chinese society has been a source of social unrest for many years. The government has now proposed a way to ameliorate the problem, according to a report in the New York Times:

The proposal was mired for months in an internal dispute about whether to aggressively scale back the rising salaries and benefits of some officials working for state-owned business and banks. The document that emerged from the discussions is filled with commitments to deal with that issue and other sources of public concern about the gap between the incomes of residents of dirt-poor villages and those living in privileged urban enclaves.

“There are some stark problems in income distribution that need urgent solving,” said the plan, which was issued on the central government’s Web site. “Chiefly, there remain quite large disparities in urban-rural development and incomes, income allocation is poorly ordered, and there are quite serious problems with invisible and unlawful sources of income.” The document was drafted by the National Development and Reform Commission and other central agencies.

The income distribution plan was one of the initiatives promised by the departing Chinese prime minister, Wen Jiabao, who leaves office in March. But it also underscores the extent to which the country’s new generation of leaders under Xi Jinping has also promised to expand state spending on health care, education and social welfare.

Read more about the economic divisions in China via CDT’s special page The Great Divide.

© Sophie Beach for China Digital Times (CDT), 2013. | Permalink | One comment | Add to del.icio.us
Post tags: corruption, gini coefficient, income gap, wealth gap
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Last Monday, the China Internet Network Information Center (CNNIC) published its annual report on the nation’s internet usage and infrastructure. According to the report, the Chinese internet continues to boom, with usage swelling 10% to 564 million users in 2012. But the report also shows that the country’s internet use – much like its economy – is highly uneven.

While web penetration in Beijing surpassed 72% in 2012, fewer than 30% of residents in the interior province of Jiangxi are internet users. To put those figures in perspective, Beijing’s internet usage is comparable to that of Hong Kong or Israel. Jiangxi, on the other hand, lags behind Uzbekistan, Bolivia, and Tuvalu.

In terms of the production of online content, the gap is even wider. Beijing-based websites host over 38 billion web pages, or an average of 1,890 pages per city resident. Tibetan-based sites host fewer than 3.5 million pages, or just over one page per person.

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Post tags: gini coefficient, income gap, Internet proliferation, urban rural divide
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Chongqing, a vibrant Yangtze River metropolis, has found itself at the centre of the income equality debate in recent years. Until his sudden fall last year, Bo Xilai, the city’s former boss and the one-time rising star of the Communist Party, called for a return to Mao Zedong-era socialist values and better distribution of the country’s growing wealth.

However, he was ousted following revelations of his wife’s involvement in the murder of a British businessman. Mr. Bo himself is expected to soon face trial on charges of corruption and abuse of power.

But Mr. Bo is remembered well by porters like Ms. Yang, who say life for Chongqing’s poor was better under his rule.

Yang Xingcheng, one of Chongqing’s legendary “bang-bang” porters who carry goods up and down the city’s hills on a bamboo pole slung over their shoulders, didn’t want to talk politics, but also said business today is “not as good as last year or a few years ago.”

See also photos from The Globe and Mail’s John Lehmann, who also joined MacKinnon on a journey to retrace the path of Mao Zedong’s Long March and explore the challenges facing today’s China. China made its Gini coefficient – which measures income inequality – public last week for the first time since 2000.

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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.

© Melissa M. Chan for China Digital Times (CDT), 2013. | Permalink | 2 comments | Add to del.icio.us
Post tags: gini coefficient, inequality, one-child policy, wealth gap, World Bank
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Economists reacted positively to the data, according to The Sydney Morning Herald:

“The export slowdown shows external demand faces uncertainty due to concerns over the fiscal cliff in the US,” said Zhang Zhiwei, chief China economist at Nomura in Hong Kong. “Nonetheless it does not change our view that growth is on track for a strong recovery in Q4, as (growth) is mostly domestically driven.”

…

“The Chinese economy is now in a sweet spot and can stay in the sweet spot through the first half of 2013,” Ting Lu, an economist at Bank of America-Merrill Lynch, said before the trade figures were released. “Beijing will be happy to sustain the current policy stance.”

With China likely to post its slowest full-year of growth since 1999, however, Chinese leaders concluded the annual Central Economic Work Conference in Beijing on Sunday by warning that the world’s second largest economy is not yet out of the woods. With Europe’s debt crisis still raging, and with the U.S. economic recovery still uncertain amid the ongoing “fiscal cliff” deadlock in Washington, The Wall Street Journal adds that China’s new leaders “sent their strongest signal yet” that they will focus on retooling the economy to rely less on export growth and more on domestic demand. Here, the China Daily reports that top policymakers continued to pledge reform - from cutting taxes to enabling greater mobility for rural workers, and providing more support to agriculture and innovation – to keep economic growth stable.

But was anything new put forth following the conference? The Financial Times’ Jamil Anderlini checked in from Beijing today with a resounding “no”, writing that the leaders revealed an economic agenda “largely in line with that of the outgoing administration.” Similarly, Keith Bradsher of The New York Times reports that the government released a lengthy statement calling for continuity, at least for now:

The statement endorsed tax cuts, continued curbs on real estate speculation and a broader effort to increase domestic consumption and wean the economy from its dependence on exports and investment.

“The opportunities facing us are no longer the traditional ones of simply entering the international division of labor, expanding exports and accelerating investments, but rather new opportunities forcing us to expand domestic demand, improve innovative capacities and promoting the transformation of the mode of development,” the statement said.

…

While China has many economic opportunities, “we must soberly recognize that there are still many risks and challenges confronting our national development,” the overview released by Xinhua said. “Problems with imbalances, ill-coordination and lack of sustainability remain pronounced.”

“The contradiction between downward pressures on the economy and relative overcapacity in production is deepening,” the statement continued. “Business operating costs are rising while innovative capacities are inadequate. There are latent risks in the financial sphere.”

Expectations of reform have indeed been heightened of late, as new Communist Party chief Xi Jinping retraced Deng Xiaoping’s 1992 “Southern Tour” with a similar trip of his own last week. The Chinese Academy of Social Sciences even warned last week that China’s economic imbalance had reached alarming levels that would hamper growth in the absence of bold action. Such a warning comes as a new survey indicates that China’s Gini coefficient, or measure of income inequality, may be far higher than previously thought.

While China will need reform to ensure that growth returns to the 8% level that the state-run Bank of China predicts for 2013, not everyone has bought into the rhetoric. MarketWatch’s Craig Stephen wrote Sunday that “once again it looks as if talk is easier than action when it comes to economic reform in China.” The Financial Times’ Kate Mackenzie echoed that sentiment today:

Don’t be misled by the proclamations of ‘reform‘ or ‘quality growth‘ from China’s central economic work conference at the weekend. It’s more of the same, at least for the time being.

The more concrete message was that economic and monetary policies would “remain stable for year ahead”. In other words: keep pursuing for just a little longer the brittle policies of property price inflation, more infrastructure investment, and looser money and credit.

Dr. Robert Lawrence Kuhn, however, does see some key reforms on the horizon. From Forbes India:

I expect substantial changes in the economy in the months following March. In China, it is a (cultural) tradition of new governments to carry on with policies of the earlier regime for a long time. Any change is thought to be disrespectful. But this time, it seems, the risk of not reforming is much higher than the risk of change. For example, there have been a series of corruption scandals. The new leaders will be under more pressure to change much quicker. While I do not expect much change on international policies—the rigid nationalism and tough rhetoric—there will be quick changes on the economic front. Xi Jinping’s opening speech showed this. The address was rational, without the usual political jargon, and offered hope. One feedback I got from his aides is that “the biggest concern now is high expectations”. The seven top leaders are the first batch not picked by Chairman Mao Zedong or Deng Xiaoping. This marks a very important transition for China.

One question I am asked very often is for how long will China be able to retain its edge in manufacturing? From the leadership’s standpoint, the answer is clear: Wages have to go up. The economic divide is at several levels—the coastal population versus those living inland, urban versus rural, basically rich versus poor. For decades, rural wages have been increased by moving population to the cities. In the past 40 years, about 500 million people have moved to urban areas. So, the rural population has halved, while income levels have doubled. It is only possible to increase workers’ wages if the margins on manufacturing go up.

The bottom line, according to Asia advertising executive Tom Doctoroff, is that reform is no longer a luxury and all eyes are on Xi Jinping and his new regime to inspire public confidence in his blueprint for economic progress:

Many now ask whether the contradictions of society — between rich and poor, urban and rural, young and old, politically connected and “small potatoes” — are approaching the breaking point. While crisis is not imminent, loss of absolute confidence in the future of the country has manifested itself in many ways, from 200,000 local protests to a slowdown in sales of luxury goods, real estate and autos. According to C-trip, bookings mid-level travel destinations such as Hainan island, usually popular amongst the new middle class, are down dramatically. Job-hopping, perhaps the greatest indicator of economic optimism amongst ambitious Chinese, has slowed, a sign of diffused anxiety.

…

However, until Mr. Xi outlines specific, incremental steps of structural reform — intra-party checks and balances, independent commercial courts, urban residency reform, rural land-ownership reform, further strengthening of the welfare net and other institutional mechanism to safeguard the economic interests of individuals — consumer confidence will wane. If so, “rebalancing” will remain a long way off, and the China’s potential under-realized. China will certainly not flirt with Western-style democracy or laissez-faire capitalism. But the Chinese, supreme pragmatists that value stability above all else, know the status quo is unsustainable.

Have China’s Trade Statistics Been Inflated?

November export growth of 2.9% may have disappointed, especially when compared to robust figures of 9.9% and 11.6% in September and October, respectively, but what explains the big swing? Forbes’ Gordon Chang points to a couple of reasons why fake transactions may have distorted the trade data:

Are we to believe China had an export boom lasting just two months?  Anything is possible, but a more likely explanation for the anomalous September and October figures is that they were distorted by fictitious transactions.

Anne Stevenson-Yang of J Capital Research in Beijing, in one of her November e-mail alerts, suggests that the uptick in exports may have been partly due to hot-money inflows caused by currency speculation.  Exporters, she notes, are overstating sales, allowing them to book revenues in dollars.  They then use the paperwork to get permission to sell dollars for renminbi.  The result is that exporters made money with their currency transactions, but the byproduct is that the Ministry of Commerce’s trade figures overstate China’s exports.

Tom Holland of the South China Morning Post reports an even more ingenious scheme that has artificially pushed up Beijing’s trade statistics.  There is, he notes, legitimate trade where goods go from one part of China to another through Hong Kong.  For example, it makes sense to transport through Hong Kong components manufactured in Shanghai for final assembly in Shenzhen.  Since 1997, Hong Kong has been part of the People’s Republic, but it is not considered as such for customs purposes.

Other News:

• Japan may have overtaken China as the largest holder of U.S. debt, according to The Wall Street Journal.
• The Wall Street Journal reports that as part of its push to boost domestic demand, China will lower tariffs on a range of imported items next year.
• Bloomberg reports that power consumption posted its biggest monthly gain since February.
• MarketWatch’s Craig Stephen writes that China’s regulator is taking steps to heal its sickly stock markets.
• The State Administration of Foreign Exchange has removed the $1 billion limit for foreign sovereign wealth funds, central banks and monetary authorities investing in China through the QFII program, according to Reuters.

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The Gini coefficient, an index measuring income inequality, was 0.61 in 2010, based on a survey of 8,438 households by the Survey and Research Center for China Household Finance, a body set up by the Finance Research Institute of the People’s Bank of China and Southwestern University of Finance and Economics. The survey also estimated the urban jobless rate in July 2012 was 8.05 percent, almost double the official figure.

[…] “China’s wealth gap is so prevalent between regions, sectors, and urban and rural that it’s impossible to see a meaningful decline in the Gini coefficient in the short term,” Gan Li, director of the Chengdu-based center and a professor at Texas A&M University in College Station, Texas, said at a briefing in Beijing today. “Depending on market forces alone can’t resolve the gap and China must change the structure of income distribution and rely on massive fiscal transfers to narrow such a yawning disparity.”

Higher fiscal revenue and a bigger share of state-owned enterprises’ profits could give the government about 3.8 trillion yuan ($610 billion) a year to spend on income redistribution, said Gan, who has a doctorate in economics from the University of California at Berkeley. In the long run “China needs to beef up funding for education and reduce inequality of opportunity to lower the income gap,” he said.

Although higher than expected, the new figure may still be too low. From Chen Dujuan at Global Times:

Zheng Xinye, a professor at Renmin University of China, told the Global Times Sunday that the real Gini coefficient may be even higher than 0.61, since the super-rich are hard to reach for surveys.

“The widening income gap was caused by restrictions that kept small and medium-sized companies from entering high-profit sectors, as well as by employment discrimination,” Zheng said. Data showed that the wage gap between finance and agriculture, which earn the highest and lowest wages respectively, has widened to a ratio of 4.2 in 2010 from 2.24 in 1997.

Zheng said that low standards for labor and environmental protection have increased the wealth of the rich at the cost of the health and income of the poor.

[…] Greater urbanization will ease the income gap, Pan Jiancheng, deputy director-general of the China Economic Monitoring & Analysis Center of the National Bureau of Statistics (NBS), said at the survey release press conference, noting that China needs to boost economic transformation and improve social security.

The Gini coefficient is not a definitive or comprehensive measure of inequality, however, its widespread use arising in large part from its simplicity and convenience. Mark Gimein described the measure’s limitations at Slate (via Trey Menefee) in 2008:

[…] Measuring inequality, or what most people think of as inequality, is not simple. And, perhaps more importantly, the standard measure of inequality tells us a lot less about poverty than we might think or hope.

To see why, let’s look a little bit into the mathematics of inequality. The Gini index is a number that expresses the proportion of income that goes to people on various steps on the economic ladder. In a country in which everyone has exactly the same income, the Gini coefficient will be zero. On the other hand, in a country in which all the income goes to one person, the Gini coefficient will be 1, and the Gini index will be 100 (technically, it’ll never reach the perfect 100, but it’ll be incredibly close). In real life, the United States has a Gini index of 45, and Norway’s is 28.

[…] The problem here is that Gini index alone does not yield enough information to indicate what proportion of a country’s people are poor—even if we know the country’s total income. A measure omitting that crucial concept doesn’t get to what people really mean when they talk about inequality. Take it out, and most of the rhetoric about inequality loses its soul.

Comparing the Gini coefficients of countries at different stages of development is also problematic, as Tsinghua University economist Wei Jie explained to People’s Daily Online in 2006.

At The Wall Street Journal, Tom Orlik described the study’s findings on unemployment:

The survey represents the most ambitious attempt yet to map China’s labor markets, household income and asset ownership—areas where the official data are widely regarded as inaccurate or deficient.

Employment is a hot-button issue for China’s ruling Communist Party, with the risk that high levels of joblessness could trigger destabilizing unrest. At the end of 2008, severe job losses for migrant workers helped prompt the government to unleash a massive stimulus package.

[…] Despite a significantly higher rate of unemployment than reported by the government,China’s labor market still appears to have weathered 2012′s growth slowdown relatively well. A loss of around 4.5 million jobs for China’s migrant workers in the past year has taken their unemployment level to 10 million, still well below the 23 million out of work in 2009.

That the official figure seems inaccurate comes as no great surprise. Last month, Caixin’s Zhang Huanyu pondered the official urban unemployment rate’s mysterious steadiness since the start of 2010:

The urban unemployment rate announced by the government has remained at 4.1 percent from the start of 2010 to June 30. Even during the worst of the global financial crisis in 2009, the figure climbed to only 4.3 percent.

When I talk to government officials and scholars, they unintentionally reveal the importance they attach to the statistic. But the fact the figure barely changes is a sign its accuracy can be doubted. Unfortunately, this is true of many statistics released by government agencies in China.

[…] The National Bureau of Statistics once promised that starting in 2011 it would release more accurate unemployment figures, but so far we haven’t seen them.

In March, bureau director Ma Jiantang was asked about the unemployment rate and said: “From the research we have done, the gap between our data and the real situation is narrowing.”

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Of 11,405 Chinese Internet users polled by the Social Survey Center of China Youth Daily last week, 66.6% said they thought the country was likely to pursue reforms related to income distribution in the future, the newspaper reported on Tuesday (in Chinese). Second on the list were reforms aimed at curbing corruption (57.8%), followed by reforms of the economic system (53.5%) in third.

[…] China “huge income disparity” was likewise the top choice when Internet users were asked to identify factors that could drag down the country’s development in the next decade, garnering votes from more than 75% of respondents.

Measuring income inequality is difficult in China, in part because rich Chinese families are loathe to reveal the true extent of their wealth. Even so, independent research suggests the income gap is expanding rapidly. Where the vast majority of Chinese families were on roughly equal financial footing prior the launch of economic reforms in the late 1970s, one academic survey of more than 8000 Chinese households conducted by Texas A&M professor Gan Li in 2011 found the country’s top 10% controlling 56% of income – a figure that makes China more equal than some African countries.

Victoria Ruan examined the scale and risks of China’s wealth gap at South China Morning Post:

Li Shi, a professor at Beijing Normal University who has become known as “Mr China Income Distribution” believes the widening wealth gap threatens economic growth.

He uses an internationally recognised ratio, the Gini coefficient, to measure income distribution – where a Gini coefficient of zero expresses perfect equality and a Gini coefficient of one expresses maximum inequality. The danger line where social turbulence can easily occur is 0.4.

When China began to reform the planned economy three decades ago, the gauge was at 0.3. It has since risen more than 50 per cent, hitting 0.48 back in 2007.

But while the gap continues to expand, and although the last ten years has been described as a “lost decade”, Tania Branigan wrote at The Guardian that the outgoing rulers have achieved a lot for China’s poor:

[Some] believe that for all the disappointments, the administration is leaving behind what could yet prove a significant political legacy: building the skeleton of a welfare state and attempting to put a shelf below those at the bottom of society.

“The government invested a lot of money in ordinary people’s living standards … China is starting to enter the ‘welfare China’ stage, although it is still at quite a low level,” noted Beijing-based scholar Deng Yuwen, in many ways an outspoken critic of the authorities’ record.

[…] While inequality has soared over the past decade – the gap between town and country has expanded, with rural dwellers enjoying less than a third of average urban incomes on official measures and perhaps as little as a fifth according to experts – research by Tony Saich of Harvard University found that satisfaction with the government had actually gone up between 2003 and 2011.

Strikingly, significant increases were seen among the poorest and the wealthiest. “When we started, those in the poorest categories were least satisfied with the local government,” Saich said. “That’s where I think things like the dibao [a subsidy for the poorest] and some kind of medical insurance have improved their view.”

Reuters’ James Pomfret also suggested that income equality may not be the most urgent problem facing China’s new rulers. He interviewed a rurual Guizhou resident whose local farmland is to be flooded by a new dam:

“We oppose it, but we also can’t oppose it. That’s how things are in China,” said Shen. “They eat the people and don’t even spit out the bones … those officials with wolf’s fangs.”

[…] As vast as the income disparity is between the rich and poor — Beijing hasn’t published official inequality statistics for over a decade, but the United Nations estimates the gap has grown steadily wider over the last decade — the maltreatment of ordinary Chinese citizens by officials may be the more dangerous flashpoint.

“The main challenge is not income inequality, it’s power inequality, and it’s much less easy to deal with,” said Martin Whyte, a Harvard University sociologist and author of a book on China and its disparities.

“Keeping this power inequality volcano dormant may be much more difficult than keeping the income inequality volcano under control, since to do so would require not simply new programs and financial resources, but fundamental political reforms.”

In order to narrow the perceived power gap, deputies at the 18th Party Congress include a contingent of 26 migrant workers, representing 1.14% of the total. From Xinhua:

To consolidate its power base, Dai Yanjun, a professor of the Party School of the CPC Central Committee, said the CPC must involve more members of industrial workers in major policymaking so that it can improve their standing and expand their influence.

[…] Kang Houming, a migrant worker deputy from southwest China’s city of Chongqing, said he hopes to see the government step up efforts to provide equal access to education and health care for migrant workers.

[…] The voices of Kang and other advocates have been heard by the government. It has rolled out a series of measures to improve conditions for migrant workers, helping them retrieve withheld wages and establishing a minimum wage mechanism.

The Hindu’s Ananth Krishnan interviewed Kang, who has also served as a delegate to the National People’s Congress:

Five years ago, the construction worker from Chongqing was chosen to represent the migrant labour force of the south-western municipality in the NPC. The move was largely a symbolic one — intended to show that the NPC, widely criticised even by Chinese scholars as a rubber-stamp legislature filled with political and business elites, was indeed a people’s congress.

Mr. Kang has spent the last five years fighting to push through legislation to bolster the rights of workers. He will step down in March when the current Parliament meets for one last time to complete a once-in-a-decade leadership transition, which will get under way on Thursday when the Communist Party chooses a new leadership.

[…] Mr. Kang looks back at his term with mixed emotions. Legislative efforts to push hukou reform have failed, with local governments wary of the added expense to social security. He counts as his most memorable achievement securing legislation to insure migrant workers for any disabilities that arise through work. “Before, migrant workers couldn’t transfer their social security insurance to other cities, but now they can continue their insurance,” Mr. Kang said.

Unsurprisingly, however, money and power more often go hand in hand. Kang cheerfully admits to being “probably the poorest” delegate, and those at the opposite end of the spectrum hold immense wealth: Bloomberg reported in February that the richest 70 delegates at the National People’s Congress had a combined wealth more than ten times greater than that of the top 660 officials in the U.S. government. More recently, exposés by Bloomberg and The New York Times have revealed some of the family wealth of incoming president Xi Jinping and departing prime minister Wen Jiabao, respectively.

Wen addressed the Times article by ordering an official probe into its claims, and two contenders for the next Politburo standing committee endorsed asset disclosure for senior officials on Friday. But some continue to argue that increased transparency would be premature. From South China Morning Post:

Cai Rang, a congress delegate and party secretary at the state-owned China Iron and Steel Research Institute Group, agrees that government and party officials should publicise their personal assets, but doesn’t think it’s feasible in the short term.

“In the long term, this should be the way to go. But in the short term, we don’t have enough psychological and technical preparation for it. The whole society, including the masses and the officials, is not ready yet [….]“

© Samuel Wade for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: 18th party congress, corruption, gini coefficient, Hu Jintao, income gap, migrant workers, National People's Congress, wealth gap, welfare
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Ryssdal: … Somebody’s making money.

Schmitz: Right. Developers are obviously making a lot of money. And of course the government of China itself is getting rich and that’s something that irks a lot of the people I spoke to. In the past five years, much of China’s economic growth has come from building infrastructure. The party has spent hundreds of billions of dollars on this and most of these contracts have gone to state-owned companies. So in other words, the government is giving money to itself. So one man I spoke to was really frustrated with this.

Man speaking

Ryssdal: “Nothing’s OK,” right? Everything is not all right.

Schmitz: Nothing is OK. So he’s saying that the Communist party originated from the poor, but now has basically left the poor behind. He’s a security guard who makes $5 a day and he lives in a 30-square-foot apartment with his wife and his daughter and he isn’t happy at all. So I asked him. I said how could the government improve the situation in China. And so get this, he said that China should start a war.

Ryssdal: No, come on. Really?

Schmitz: Yeah. And I said with whom and he said it doesn’t matter. 

The Los Angeles Times reported the study’s release last week, and described China’s use by economists as “a real-life laboratory to study how money, inequality and change are tied to our satisfaction with life”.

Easterlin and his fellow economists based their findings on six surveys on life satisfaction in China, most of them conducted by Western firms. The fall and rise of happiness levels in China mirror the trends seen in Russia and other European countries transitioning from communism, Easterlin said.

But what makes China especially interesting is that happiness levels dipped and rose while incomes were soaring, showing that joblessness can drag happiness levels down even as national wealth is on the rise. The results echo earlier studies that have found that growing wealth does not tend to increase happiness because expectations rise along with it. People also tend to compare their wealth with others’.

“If somebody got a higher salary this year than last, he might not be happy,” Jiaotong University professor Wang Fanghua told The Times last year. “But if his income is better than his friends’, then he will be happy.”

At TIME, Austin Ramzy noted that Bo Xilai’s gestures towards addressing economic inequality helped build his broad popularity among Chongqingers.

When Bo Xilai, the rising Chinese Communist Party official who was purged in March, gave his last public comments before disappearing into detention, he was wrong about a lot of things. That bit about not being under investigation, for instance. But one line he uttered has the clear ring of truth, and it poses a serious issue for China’s leadership as it attempts to navigate this year’s political transition, the economic slowdown and the ripples loosed by Bo’s removal. Bo revealed that China’s Gini coefficient — a statistic that measures the gap between rich and poor — had entered into worrying territory. He described the number, which hasn’t been made public in more than a decade, as over 0.46. Anything higher than 0.4 is considered dangerously high and capable of fueling unrest.

In Chongqing, where Bo was Communist Party secretary for 4½ years, he made building economic protections like subsidized housing for the megacity’s poorest residents one of the tenets of his “Chongqing model.” The wholesale corruption he and his family have been accused of may have steered the wealth gap in the wrong direction, but Bo understood the political importance of appearing to care about the problem, just as he knew the appeal of cracking down on crime and reviving Mao-era culture.

© Samuel Wade for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: Bo Xilai, economic growth, food prices, gini coefficient, happiness index, income gap, inflation, property prices
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From Bloomberg pool report of Bo Xilai remarks: Bo says Chongqing cooperating in Wang Lijun case. He, Bo, is not being investigated.

— Tom Lasseter (@TomLasseter) March 9, 2012

From Bloomberg pool report: Bo Xilai says speculation that he offered to resign was false.

— Tom Lasseter (@TomLasseter) March 9, 2012

Stellar performance by Bo Xilai today, held forth for 2 hours except when he left 15 mins ‘to take an important call’

— Ananth Krishnan (@ananthkrishnan) March 9, 2012

AP reports from the conference:

Bo was the only one of the 25 members of the ruling Communist Party’s Politburo not at Thursday’s meeting of the National People’s Congress, and no seat or place card for him was evident. The body is holding its annual 10-day session in Beijing this month.

Answering questions Friday morning at a meeting of the Chongqing delegation, the telegenic, somewhat flamboyant Bo said he missed Thursday’s session because he was ill. He said Wang was under investigation and conceded to failings in leadership.

“This was a case of negligent supervision on my part,” said Bo, who had been considered a leading candidate for appointment to the party’s all-powerful Politburo Standing Committee at its national party congress this fall.

Bo declined to discuss his political future other than say he had not factored this year’s congress, the party’s 18th since its 1921 founding, into his future.

The current political intrigue in Chongqing was not the only topic broached by Bo. Bloomberg reports that he also let slip a tightly guarded number: China’s gini coefficient. While he didn’t give the exact number, he did indicate that the number has surpassed the level which usually indicates social unrest:

China’s Gini coefficient, an index of the income gap, has exceeded 0.46, Bo, the Communist Party Secretary for Chongqing Municipality, told reporters in Beijing today, without giving specifics. The index ranges from 0 to 1 and the 0.4 mark is used as a predictor by analysts for social disturbances.

The meeting where Bo spoke, held during the annual National People’s Congress in Beijing, highlighted Chongqing’s efforts to reduce the urban-rural income gap during the past five years, encompassing Bo’s tenure. Bo, 62, has reintroduced slogans and songs from the late Chairman Mao Zedong in a bid to re-instill a Communist spirit in a country that still officially adheres to the principles espoused by Karl Marx.

“If only a few people are rich, then we are capitalists” and “we’ve failed,” Bo said.

Bo reportedly ended his press conference with a comment on his son, Bo Guagua, who graduated from Oxford and has been seen driving around Beijing in a luxury car:

Bo Xilai ended with statement of his own, saying rumors of his son driving a Ferrari not true, got into Oxford on full scholarship

— Ananth Krishnan (@ananthkrishnan) March 9, 2012

See also a Reuters report about the press conference. Read more about public speculation over Bo’s political future. See also previous coverage of Bo Xilai and Wang Lijun via CDT.

© Sophie Beach for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: Bo Guagua, Bo Xilai, Chongqing, gini coefficient, npc 2012, Wang Lijun
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