Government Proposal Aims to Narrow Economic Divide

Last month, the Chinese government made the country’s official gini coefficient public for the first time since 2000. The official number, which measures the level of economic inequality in a society on a scale of 0 to 1, was a moderate .474 in 2012. However, other surveys have found China’s gini coefficient to be at a more alarming level of .61. Now, many are questioning the accuracy of the official numbers, largely because of corruption which masks income at the highest levels. From Caixin:

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.


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