Photo: life.com

On a residential street in Shanghai’s downtown Jing’an District, the ever-widening gap between the city’s wealthy and destitute is brought into sharp focus. Kangding Lu is home to One Park Avenue, a compound of slick, high-rise apartment blocks complete with an opulent clubhouse and swimming pool. Apartments here rent for upwards of 15 thousand RMB a month. By contrast, beside One Park Avenue sprawls a far less salubrious neighbourhood filled with low shacks, brick hovels with corrugated iron roofs held on by bricks, and ragged children watching their grandparents play cards. This dichotomy is by no means restricted to Shanghai.

The official picture

At the end of 2009, China’s Academy of Social Sciences published its Annual Report of China’s Social Development. The report estimated that China’s Gini coefficient had topped 0.496, surpassing the World Bank’s warning level of 0.4 in 2000. The Gini coefficient is a method of measuring the inequality of wealth, and was designed by Italian statistician Corrado Gini in 1912. The scale ranges between 0 and 1, with 1 signifying the widest possible wealth gap, and 0 the smallest. For comparison’s sake, Sweden has a Gini coefficient of 0.23, while Namibia’s is 0.7. The higher the figure, the greater the risk of social unrest.

According to China’s Director of Statistics, there are 130 billionaires in China, and 150 million Chinese citizens living in poverty. Ten percent of the population live on one dollar a day – the United Nations’ poverty benchmark. China has 825,000 citizens with a net worth above US$1.5 million, and the nation’s consumption of luxury goods topped US$9.4 billion in 2009. Government spending has increased by more than 100 billion RMB (US$14.66 billion) per year since 2005. 

The real picture

But these figures may actually be a modest version of the reality. China’s National Economic Research Institute conducted a study on the incomes of two thousand families from various echelons of society. The results showed that many high-income citizens have large stockpiles of hidden income that could total as much as 4.8 trillion RMB (US$686 billion), out of which 75% is owned by 10% of households. Since these figures are not part of official statistics, China’s actual wealth gap is far larger than the government portrays.

One of the more sinister aspects of the wealth gap is the fact that many of China’s wealthiest are the children of government officials. China has 3,220 people with net worth of over 100 million RMB (US$14 million). Out of this number, 2,932 are the offspring of high-ranking Communist Party cadres, and much of their wealth is inherited.

Bridging the gap

Measures are already afoot to close the wealth gap, but it will be a slow process. Despite Deng Xiaoping’s proclamations during the reforms of the late 1970s that “some people [would] get rich first” under the new market driven economy, the situation must change if the much-vaunted harmonious society is to be preserved. In his keynote speech to parliament in March 2010, Wen Jiabao vowed to close the gap. “We will not only make the ‘pie’ of social wealth bigger by developing the economy, but also distribute it well,” he said, unveiling plans to “reverse the widening income gap”.

Wen’s ideas include a radical reform of the housing registration system that currently prevents migrant workers from obtaining adequate health care, housing, and education for their children. A noble step, but unfortunately Wen’s scheme only extends to towns and low tier cities, meaning that the situation in the major metropolises will not change. The State Administration of Taxation announced a new regulation midway through 2010 that meant more stringent observation of high-income taxpayers. In theory, this will lead to less corruption, but until the Communist Party agrees to more transparency, progress will be limited.

One area of success is the raising of the minimum wage, which has already been rolled out across 10 provinces, with wealthy Jiangsu at the helm. Shanghai, Guangdong and Zhejiang now have a minimum monthly income figure of 1,000 RMB. Beijing’s is 960, while Shenzhen’s is 1,100.
While China’s wealth gap may appear too wide a canyon to bridge, such a disparity is unacceptable, and an obstacle to progress. A nationwide raising of the minimum wage, fairer regulations for migrant workers, and a clamp down on corruption are all good places to start; successful redistribution of wealth will be a greater challenge.
 

Related links
China’s Poverty Line
How China is Becoming a Hotbed for Illegal Foreign Workers
Fair and Balanced? Views on Health Distribution in China

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Keywords: widening wealth gap China income gap China gap between rich and poor China Wealth gap China