China’s Hidden Wealth Feeds an Income Gap

For the New York Times, Didi Kirsten Tatlow looks at the role of the gray economy in obscuring China’s economic figures as the prodigious spending habits of the country’s wealthy elite attract international attention:

As year-end reports on 2011 emerge from companies and organizations around the world, an astonishing picture is building of extravagant, high-end Chinese spending that offers a glaring contrast to the hardscrabble, high-saving image of most Chinese.

Wealthy Chinese are snapping up gold, Rolls-Royces and yachts, Louis Vuitton, Chanel and Gucci faster than ever before, with increases registering not in baby steps, as a decade ago, but in giant leaps — 20, 50, even 80 percent, year on year. The Chinese have become the world’s biggest duty-free shoppers.

Where is all the money coming from?

Tantalizing research by Wang Xiaolu, deputy director of the National Economic Research Institute at the independent China Reform Foundation, based in Beijing, may offer a kind of Kepler telescope for viewing the economy at something like its true size.

Read more about wealth and poverty in China and the wealth gap through our special feature The Great Divide.

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