Decades of economic prosperity in China have created huge amounts of wealth but also great disparity. A survey by Peking University in the mid 2010s estimated that China’s richest 1 percent control a third of the country’s wealth. The poorest 25 percent control about 1 percent. Jane Li, wrote in Quartz: “While there are more billionaires than ever in China, poorer families have suffered due to a lack of financial support from the government, with stimulus efforts mostly directed at businesses. A widening wealth gap has led many to mourn their increasingly bleak prospects, and prompted some to reject social norms around work and productivity. [Source:Jane Li, Quartz, December 29, 2020; Emily Rauhala, Washington Post, September 8, 2016]

Alarmed by the widening wealth gap in China after he saw a luxury car with a price tag of more than $15.7 million at an auto show in Shanghai, former prime minister Zhu Rongji said: "Quite a few entrepreneurs even own private aircraft. But in the countryside, people in some places still do not have enough to eat. So many years after the Liberation [the founding of the People's Republic in 1949, rural residents still remain so poor.” [Source: Clifford Coonan Irish Times, January 22, 2011]

A poll conducted by the Pew Research Center before the 2008 Olympics found that 89 percent of the Chinese interviewed said they were concerned about the gap between rich and poor. As China’s economy has rapidly grown, it has gone from having one of the lowest income disparities of incomes to one of the highest in a relatively short amount of time. According to the National Bureau of Statistics, in the mid 2000s the top 10 percent of the Chinese population controlled 45 percent of the country’s wealth while the poorest 10 percent had 1.4 percent and had incomes less than 1/12th of those of the richest 10 percent. By some accounts the disparity now is greater than it was before the Communists took power in 1949. Income disparity is also geographical phenomena, with people in the richest parts of the country earning 10 times more than those in the poorest parts. Much of the China’s wealth is concentrated in the coastal cities in eastern and southern China. The interior for the most part remains poor.

Income Inequality:
World Bank rich-poor (R-P,):ratio of richest 10 percent to poorest 10 percent: 21.6 to 1 (compared to 4.5 to 1 in Japan. 18.5 to 1 in the U.S., and 93.9 to 1 in Bolivia); and 20 percent: 11.2 to 1
CIA rich-poor (R-P): ratio of richest 10 percent to poorest 10 percent: 21.8 to 1, 2000
World Bank Gini Index: 38.5 (2016) 1 (compared to 32.9 in Japan. 41.4 in the U.S., and 42.4 in Bolivia);
CIA Gini Index: 46.5, 2016
The rich-poor (R-P) ratio is the ratio of the average income of the richest 10 percent to the poorest 10 percent or the richest 20 percent to the poorest 20 percent.
The Gini index, a quantified representation of a nation's Lorenz curve. A Gini index of 0 percent expresses perfect equality, while index of 100 percent expresses maximal inequality.
[Source: United Nations Development Programme, CIA World Factbook, World Bank Wikipedia Wikipedia ]

Distribution of Income or Consumption in China by Percentage Share in 1998:
Lowest 10 percent 2.4
Lowest 20 percent 5.9
Second 20 percent 10.2
Third 20 percent 15.1
Fourth 20 percent 22.2
Highest 20 percent 46.6
Highest 10 percent 30.4
[Source: 2000 World Development Indicators]

Household income or consumption by percentage share: lowest 10 percent: 2.1 percent; highest 10 percent: 31.4 percent. Data on household income or consumption come from household surveys, the results adjusted for household size. Nations use different standards and procedures in collecting and adjusting the data. Surveys based on income will normally show a more unequal distribution than surveys based on consumption. The quality of surveys is improving with time, yet caution is still necessary in making inter-country comparisons.[Source: CIA World Factbook, 2020]

Good Websites and Sources: Book: Civil Discourse, Civil Society and Chinese Communities by Randy Kluver, John Powers/ ; Book: Studies in Chinese Society by Arthur Wolfe, Emily Ahern, Emily Martin/ ; Wikipedia article Wikipedia ; Mao on Classes in Chinese Society ; Disparity of Income ; Chinatown Connection ; Book: "Chinese Society: Change, Conflict and Resistance" edited by Elizabeth J. Perry and Mark Selden (Routledge, 2010)

China’s Income Inequality Surpasses U.S.

In the early 2010s, the income gap between the rich and poor in China surpassed that of the U.S. and is among the widest in the world, a report by the University of Michigan said. Lorraine Woellert and Sharon Chen of Bloomberg wrote: “A common measure of income inequality almost doubled in China between 1980 and 2010 and now points to a “severe” disparity, according to researchers at the University of Michigan. The finding conforms to what many Chinese people already say they believe — in a 2012 survey, they ranked inequality as the nation’s top social challenge, above corruption and unemployment, the report showed. [Source: Lorraine Woellert and Sharon Chen, Bloomberg, April 29, 2014 \=]

“The growing wealth disparity that accompanied China’s breakneck growth in the decade through 2011 has increased the risk of social instability in the world’s most populous nation and biggest developing economy. “Chinese recognize income inequality as a serious social problem; on the other hand, they seem to have high tolerance for income inequality,” said co-author Yu Xie, a sociology professor and a researcher with the university’s Institute for Social Research in Ann Arbor, Michigan. “They don’t like it, but they seem to accept it as a fact of life. Something they have to pay for fast economic growth.” \=\

“Using data from six surveys conducted by five universities in China, the University of Michigan researchers calculated a measure of income inequality, the Gini coefficient, and compared it to earlier estimates. In 2010, the Gini coefficient for family income in China was about 0.55 compared with 0.45 in the U.S. In 1980, the gauge in China was 0.30. A coefficient of 0.5 or higher indicates a severe gap between rich and poor, according to the report, which also said the Chinese government stopped releasing the data in 2000 when the gauge reached 0.41. A reading of zero means all income is evenly distributed and 1 represents complete concentration. \=\

“Since the 1980s, the rise of income inequality has been far more dramatic in China than in the U.S.,” the researchers wrote. Government policies that favor urban over rural residents and coastal over inland regions have contributed to the gap’s rapid growth in China, the report found. The official estimate for the income gap last year was about the same as in 2012, with the statistics bureau giving a Gini coefficient of 0.473, after 0.474 the previous year. That’s above the 0.4 level that the United Nations has said is a predictor of social unrest. The University of Michigan study will be published online this week in the Proceedings of the National Academy of Sciences of the United States of America.” \=\

Reasons for Income Inequality in China

Edward Wong wrote in the New York Times:“China’s “policies have lifted millions from poverty, but have resulted in an uneven distribution of wealth, which was one of the glaring problems of early 20th-century China and contributed to the success of the Communist revolution. Ordinary Chinese are increasingly resentful of wealth being accumulated by a select few — and in particular by people connected to party officials. The market-based liberalization initiated Deng Xiaoping from the late 1970s after decades of rule by Mao Zedong has boosted incomes and GDP but also starkly widened income disparities. China is producing more millionaires than any other emerging economy, according to a 2013 Asia-Pacific Wealth Report from Capgemini and RBC Wealth Management. It counted 643,000 dollar millionaires in 2013, up 14.3 percent from 2012. At the same time hundreds of millions remain mired in rural poverty. [Sources: New York Times, July 19, 2013]

China’s system is changing very fast and “those who can take advantage of the system will get rich very quickly,” Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong told Bloomberg. “This is very common in any developing country when the societies are not mature and the system is not set up to be fair to everyone.” In contrast, the pressure on the poorest is smaller in the U.S., where better social safety nets would help to reduce social instability, he said. Ding used to work for China’s central bank. [Source: Lorraine Woellert and Sharon Chen, Bloomberg, April 29, 2014 \=]

According to a 2014 study by Peking University’s Social Science Research Center, most of China's wealth is tied up in real estate. In 2012, the study says, real estate accounted for 70 percent of all household wealth in China. Edward Wong wrote in the New York Times: The survey showed that more than 87 percent of Chinese families owned or partially owned property in 2012, and more than one-tenth of Chinese families have more than one property. In 2013, the Chinese government enacted policies to try to discourage the purchases of second properties for speculation, to try to slow down the sharp rise of real estate prices in urban areas.The average size of property for a Chinese family was 100 square meters, the survey said. [Sources: New York Times, July 19, 2013; Christina Larson, Bloomberg, July 28, 2013]

Impact of Income Inequality in China

“If the disparity continues to increase, that is not only bad politically — it will definitely affect social stability, but is also bad for the economy,”Ding Shuang, senior China economist at Citigroup Inc. in Hong Kong told Bloomberg. “People are increasingly aware of their rights,” including migrant workers and farmers, he said. [Source: Lorraine Woellert and Sharon Chen, Bloomberg, April 29, 2014 \=]

Recently, factory strikes and violent attacks have highlighted growing social unrest. “It’s not clear at this point how big of an issue inequality is to the average Chinese peasant or factory worker,” said Glenn Levine, an economist at Moody’s Analytics in Sydney. “At the moment the main gripe of the broader population appears to be around corruption of the elites” and the environment, he said.

Cong Yaping and Li Changjiu, economic analysts with Xinhua's Center of World Studies, warned that China's Gini Coefficient - an indicator of income inequality - has exceeded 0.5, threatening poor economic security, a weaker development outlook and social instability, the Xinhua-owned Economic Information Daily newspaper reported. The warning threshold, as commonly recognized by the international community, of the Gini Coefficient is 0.4. A World Bank report said the index for China surged to 0.47 last year.[Source: Global Times, Guo Qiang, May 27, 2010]

China’s income inequality, as measured by the Gini coefficient, is now on a par with some Latin American and African countries, according to the World Bank, with 0.5 deemed by some to be conducive to social disturbances. In 2010 Justin Yifu Lin, the bank’s chief economist, identified the growing disparity as one of China’s biggest economic problems. [Source: Sharon Lafraniere, New York Times, April 22, 2011]

Yang Yiyong, director of the Social Development Research Department at the NDRC, warned that China can't afford any further rises in the Gini Index, as growing disparity could result in social unrest and “could even cause distrust in the country's public-ownership economic system.” ‘social problems, including migrant workers consecutively taking their lives and serial attacks on schoolchildren, are related to conflicts stemming from the income gap,” Yang said. Yang's words referred to seven unrelated attacks on primary school and kindergarten students in less than two months in 2010, in which more than a dozen children were killed.

Frustration over the widening income gap has resulted in bitterness among have nots and evoked nostalgia for the old days. A 48-year-old truck driver told the Los Angeles Times, “Many people our age are psychologically unbalanced. What’s so great about letting a few get rich while so many more are dragged into poverty” I really miss the Mao period when things were equal.” Sociologists call the phenomena “reactive deprivation” and say the problem “is especially true when its personal — people see a neighbor get rich even though they used be classmates and are just the same. Chinese patience is perhaps most pronounced when it comes to money.”

Income Distribution in China in the 1980s

In the Mao era there was little income disparity and few rich people. Forced egalitarianism prevailed. The Asian countries in with the lowest income disparity between rich and poor (determined by how many times more income the richest 20 percent of the population has than the poorest 20 percent) in the 1990s were: 1) Sri Lanka (4.4); 2) Indonesia (4.9); 3) South Korea (5.7); 4) China (6.5), Philippines (7.4)...compared to 9.0 in the U.S., 15.5 in Thailand and 32 in Brazil.

“Income differences in China since the 1950s have been much smaller than in most other countries. There was never any attempt, however, at complete equalization, and a wide range of income levels remained. Income differences grew even wider in the 1980s as the economic reform policies opened up new income opportunities. More than two-thirds of all urban workers were employed in state-owned units, which used an eight-grade wage system. The pay for each grade differed from one industry to another, but generally workers in the most senior grades earned about three times as much as beginning workers, senior managers could earn half again as much as senior workers, and engineers could earn twice as much as senior workers. In 1985 the average annual income of people employed in state-owned units was -Y1, 213. An important component of workers' pay was made up of bonuses and subsidies. In 1985 bonuses contributed 13 percent of the incomes of workers in state-owned units; subsidies for transportation, food, and clothing added another 15 percent. One of the most important subsidies — one that did not appear in the income figures — was for housing, nearly all of which was owned and allocated by the work unit and rented to unit members at prices well below real value. In 1985 urban consumers spent just over 1 percent of their incomes on housing.[Source: Library of Congress, 1987 *]

The 27 percent of the urban labor force that was employed in collectively owned enterprises earned less on average than workers in state-owned units. The income of workers in collectively owned enterprises consisted of a share of the profit earned by the enterprise. Most such enterprises were small, had little capital, and did not earn large profits. Many were engaged in traditional services, handicrafts, or small-scale, part-time assembly work. In 1985 workers in urban collective units earned an average annual income of -Y968. In the more open commercial environment of the 1980s, a small but significant number of people earned incomes much larger than those in regular state-owned and collectively owned units. Employees of enterprises run by overseas Chinese, for instance, earned an average of -Y2, 437 in 1985, over twice the average income of workers in state-owned units.*

The small but dynamic domestic private sector also produced some lucrative opportunities. Private, part-time schools, which appeared in large numbers in the mid-1980s, offered moonlighting work to university professors, who could double or triple their modest incomes if they were from prestigious institutions and taught desirable subjects, such as English, Japanese, or electronics. Small-scale entrepreneurs could earn considerably more in the free markets than the average income. Business people who served as a liaison between foreign firms and the domestic economy could earn incomes many times higher than those of the best-paid employees of state-owned units. A handful of millionaire businessmen could be found in the biggest cities. These people had owned firms before 1949, cooperated with the government in the 1950s in return for stock in their firms, and then lost their incomes in the political turmoil of the Cultural Revolution. In the late 1970s and early 1980s, when these businessmen were politically rehabilitated, their incomes were returned with the accrued interest, and some suddenly found themselves quite wealthy. Although the number of people earning incomes far beyond the normal wage scale was tiny relative to the population, they were important symbols of the rewards of economic reform and received a great deal of media attention. In 1985 most of these people worked in enterprises classified as "units of other ownership" (private rather than state- or collectively owned enterprises). These enterprises employed only 440,000 people out of the total urban labor force of 128 million in 1985 and paid average annual salaries of -Y1, 373, only slightly higher than the overall urban national average.*

In China, as in other countries, an important determinant of the affluence of a household was the dependency ratio — the number of nonworkers supported by each worker. In 1985 the average cost of living for one person in urban areas was -Y732 a year, and the average state enterprise worker, even with food allowance and other benefits added to the basic wage, had difficulty supporting one other person. Two average wage earners, however, could easily support one dependent. Families with several workers and few or no dependents had substantial surplus earnings, which they saved or used to buy nonessential goods. An important positive influence on the per capita consumption levels of urban families was a decline in the number of dependents per urban worker, from 2.4 in 1964 to 0.7 in 1985. In farm families the dependency ratio fell from 1.5 in 1978 to 0.7 in 1985. Farm incomes rose rapidly in the 1980s under the stimulus of the responsibility system but on average remained considerably lower than urban incomes. Household surveys found that in 1985 average net per capita income for rural residents was — Y398, less than half the average per capita urban income, which was -Y821. The value of goods farmers produced and consumed themselves accounted for 31 percent of rural income in 1985. The largest component of income in kind was food, 58 percent of which was self-produced.*

Rich and Poor Regions of China

A survey released in July 2013 by Peking University survey found vast difference between earners in top-tier coastal cities and those in interior provinces. Edward Wong wrote in the New York Times:“Average annual income for a family in 2012 was about $2,100. When broken down by geography, the survey results showed that the average amount in Shanghai was just over $4,700, while the average in Gansu Province, in northwest China, was just under $2,000. . [Source: New York Times, July 19, 2013]

According to the “Worldmark Encyclopedia of National Economies”: “Decades of strict central planning created serious disparities in incomes among citizens in different regions. The average annual income is high, for example, in Jiangsu province located in the eastern region, but Guizhou, located in the western region, has a low income level. The difference is quite enormous. For instance, in 1996, per capita annual income of Jiangsu was 2613.54 yuan while in Guizhou it was 609.80 yuan; the ratio between the two was 4.3:1. In the same year, per capita GDP and the total GDP of the eastern region were 1.9 times and 5.5 times larger, respectively, than those of the western region. [Source: Robert Guang Tian and Camilla Hong Wang, “Worldmark Encyclopedia of National Economies”, Gale Group Inc., 2002]

In the poor province where peasants have been left out of the economic miracle there have been riots and social unrest. In the Guizhou Province, workers who were not paid for working on a road rioted. The province's Communist newspaper reported "illegal elements openly smashed vehicles, illegally took hostages and robbed public security cadres and police of their firearms, thus causing serious consequences." Historically rural poverty has been one of the main causes of political unrest. In the mid 1990s, tens of thousands of peasants rioted in the cities of Kaili and Tingren in Guizhou Province over punishing taxes, harsh birth control policies and the high cost of feeding and educating their family. The army had to be called to restore order.

See Demonstrations, Taxes, Government; Land Seizures, Agriculture, Economics.

Income Gap Between Urban and Rural China

The rural-urban income gap constitutes a major part in the overall income gap. There are many more opportunities to make money in urban areas but even farmers who reach the cities as migrant workers are in effect second-class citizens, because China's hukou — household registration — system, which classifies people as urban or rural according to where they were born or their family has a registry. The People's Daily reported that the existing hukou system has helped push up the gap between the rich and poor. Citizens with rural hukou cannot generally enjoy the same social benefits as urban residents, even though they live and work in cities. One Chinese academic called the situation "counterfeit urbanisation" — cities full of people who cannot enjoy much of city life[Source: Sharon Lafraniere, New York Times, April 22, 2011]

Yu Hua wrote: “In late 1990s, CCTV interviewed kids nationwide around Children’s Day, asking what they wanted most as their gift for the day. A boy from Beijing said he wanted a real Boeing aircraft instead of a toy one and a girl from Northwest China said she wanted a pair of white sports shoes… It is appalling to see the huge gap between the dreams of two Chinese kids’ of the same age. ” [Source: Xu Ming, Global Times, April 9, 2015]

According to a July 2013 Peking University survey the average family income in urban areas was about $2,600, while it was $1,600, in rural areas, The Guardian reported: For every one yuan of a rural resident's income, a city-dweller enjoys 3.23 yuan in disposable income — and that may significantly understate the gap. Include the extra services and benefits enjoyed by urbanites, such as subsidised housing, and "many observers believe that the ratio would easily be in the range of four to five and is arguably among the highest in the world," says professor Kam Wing Chan, an expert on migrants at the University of Washington. "China's incomes are increasingly polarised. This large income gap is definitely a contributor in the background to the more frequent and violent protests and unrest." In recent years, Chinese leaders have sought to give rural areas more help. Official statistics suggest the income gap may have closed slightly within the last year, though experts suspect this reflects sampling changes. [Source: Tania Branigan, The Guardian, October 2, 2011]

Robert Guang Tian and Camilla Hong Wang wrote in the “Worldmark Encyclopedia of National Economies” in the early 2000s. “Economic reforms have made substantial improvements in the living standards of rural residents. Since 1978, the farmers boosted their incomes by engaging in specialized agricultural activities such as animal husbandry, agriculture, and orchard production, in addition to raising traditional crops. Furthermore, township and village enterprises (TVEs) accounted for the bulk of increased wage income earned by the rural residents. As the result, the disposable income among rural residents has increased dramatically since the early 1980s. However, in spite of these improvements, the rise in income of rural residents is markedly small when compared to that of urban areas. The total rural incomes are only 40 percent of urban incomes in China when in most countries rural incomes are 66 percent or more of urban income. The gap in income between rural and urban residents has grown at an increasing rate since the late 1980s. In fact, such disparity has been the most important contributor to the problem of social equity in China, followed by inter-regional disparity. [Source: Robert Guang Tian and Camilla Hong Wang, “Worldmark Encyclopedia of National Economies”, Gale Group Inc., 2002]

“In addition to the gap between urban and rural areas, city dwellers also feel the income inequality among themselves. According to the Urban Socio-Economic Survey Organization of the State Statistics Bureau, in the middle 1990s the per capita income of the top 20 percent income earners was 4.2 times greater than the bottom 20 percent, worsened from 2.9 times in the later 1980s. Although many enterprises in urban areas have either stopped working or closed down, many of the idle employees who have been laid off are waiting for future employment that would provide them the minimum incomes to maintain the basic standard of living in the urban areas. Currently, many idle workers are either receiving low incomes or no incomes at all. The wage level of retired employees is also quite low, and, considering the effects of inflation, their living standard is falling.”

Differences in Income Distribution Between Urban and Rural Areas in the 1980s

Farm family members on average consumed much less of most major kinds of goods than urban residents. For instance, a household survey found in 1985 that the average urban dweller consumed 148 kilograms of vegetables, 20 kilograms of meat, 2.6 kilograms of sugar, and 8 kilograms of liquor. At the same time, a survey of rural households found that the average rural resident consumed 131 kilograms of vegetables, 11 kilograms of meat, 1.5 kilograms of sugar, and 4 kilograms of liquor. Differences of a similar nature existed for consumer durables.[Source: Library of Congress, 1987 *]

Another indication of the gap between urban and rural income levels was the difference in personal savings accounts, which in 1985 averaged -Y277 per capita for urban residents but only -Y85 per capita for the rural population. There was great variation in rural income levels among different provincial-level units, counties, towns, villages, and individual families. While the average net per capita income for rural residents in 1985 was — Y398, provincial-level averages ranged from a high of -Y805 for farm families living in Shanghai to a low of -Y255 for the rural population of Gansu Province. The fundamental influence on rural prosperity was geography. Soil type and quality, rainfall, temperature range, drainage, and availability of water determined the kinds and quantities of crops that could be grown. Equally important geographic factors were access to transportation routes and proximity to urban areas.*

Perhaps the most serious gaps in living standards between rural and urban areas were in education and health care. Primary schools existed in most rural localities, and 80 percent of the country's primary-school teachers worked in rural schools. Secondary schools were less widely distributed; only 57 percent of the total number of secondary-school teachers served in rural schools. Most rural schools were less well equipped, and their staffs less adequately trained than their urban counterparts. Health care had been greatly improved in rural areas in the 1960s and 1970s through sanitation campaigns and the introduction of large numbers of barefoot doctors, midwives, and health workers. Most modern hospitals, fully trained doctors, and modern medical equipment, however, were located in urban areas and were not easily accessible to rural families. In 1985 two-thirds of all hospital beds and medical staff personnel were located in urban hospitals. The economic reforms affected rural education and health care positively in places where farm communities used their higher incomes to improve schools and hospitals and negatively in localities where the reduced role of the collective resulted in deterioration of collective services.*

Income Gap in Shanghai

Will Clem wrote in the South China Morning Post,’shanghai - and the Yangtze River Delta that surrounds it - is awash with cash. It's visible in the shiny new BMWs, Jaguars and Lamborghinis that cruise along the city's elevated highways. It's seen in the spectacularly overpriced designer handbags chic young mistresses use to batter their way through crowded pedestrian areas. And it blares out from the stylishly exclusive nightclubs flowing with rivers of champagne and Johnnie Walker Blue mixed with green tea. [Source: Will Clem, South China Morning Post June 25, 2011]

But it goes without saying that not everyone is on the sweet end of the deal. Those trendy nightspots are nightly laid siege by platoons of penniless beggars. Supercars come to a rest at red lights alongside rusting tricycles piled with recyclables rescued from the litter bin. The reality is that most of Shanghai's 23 million residents scrape by on a minimal amount of money, and none more so than newly arrived migrants.

According to the municipal statistics bureau, the average annual wage in 2009 - the most recent figure available - was 42,789 yuan. That's well above the national average but it doesn't go very far in a Gucci store. It is the in-your-face brashness of the nouveaux riches in the mainland's most glamorous city that is a constant reminder to the rest of the population just how meagre their own lot is.

Income Gap and Tensions in Beijing

Leo Lewis wrote in The Times, “When the Zhongguo Zun tower is completed in 2015, it will soar 500 meters above the heart of Beijing as the city's tallest building; a glittering testimony to a nation in the throes of a dirty, destructive affair with capitalism. At its feet are some of the busiest showrooms on earth, selling Ferraris and Maseratis to entrepreneurs, mostly 15 years younger than the average luxury car owner in the West. The surrounding hotels host wedding receptions about 400,000 percent more expensive than even the classiest Beijingers paid before the economy began booming. [Source: Leo Lewis, The Times, September 30, 2011 ^/^]

“All of this will proceed unrepentantly beneath the weary gaze of the "other" Beijing, a city choked by pollution and described by the dissident artist Ai Weiwei as a "constant nightmare" of violence, numbing abusiveness and fear. A paranoid government, and even some outside observers, may characterise Beijing as being "on the edge" and unable to contain the tensions and furies of wildly uneven growth. Mr Ai's assessment sees a permanent underclass too glazed by defeat to protest. ^/^

“These other Beijingers, wrote the artist recently, are the city's slaves; the migrants stripped almost completely of rights, protection and hope. Like all of the city's monuments to wealth, Zhongguo Zun will be built by migrant workers who will never shop in its stores, never buy stocks through the brokerage upstairs and will never participate in the legitimate life of Beijing. "The 'two cities' image can be employed for any big city in the world," said Hu Xingdou, professor of economics at the Beijing Institute of Technology. "But it is particularly applicable in Beijing,” he said. “In other capital cities, the rich are not so flaunty and ostentatious, and the poor do not have absolutely nothing at all. Privilege is not as rampant as in China and nowhere else are the vulnerable groups so very weak." ^/^

“In fact, say analysts, the "two cities" concept disguises the dozens of faultlines splitting Chinese society. The rich-poor divide is merely the financial expression of a rift between the powerful and the powerless; between those who can work the system and those it so openly exploits. The destitution at the bottom of Beijing society, say other Chinese academics, is tantamount to a genetic disease: the strict rules of "hukou" permits that prevent migrants gaining true residency of China's cities will condemn their children to unstable schooling now and limited prospects as they grow up. ^/^

“One of the fundamental problems, said Professor Hu, was that while Beijing had successfully coaxed the economy from basket case to behemoth, it failed to generate a coherent "China Dream"; a belief in the fundamental rightness of the system. For all the party rhetoric, there is nothing that has convinced poor Chinese of any likely improvement of their lot. "This is a fast developing and fast-changing country, so theoretically there should be a China Dream. But the solidification of class and regulations mean that the space for improvement at the bottom is far too narrow for that dream to thrive," said Professor Hu. "The children of the poor are poor forever. Compared to the American Dream, the China Dream is far inferior and far less colourful. All people can do is accept reality and never know what forces have stopped them getting rich." ^/^

Sentiments of China’s Have Nots

Most Chinese are better off than they were 20 years but many remain unsatisfied, envious and worried about their future. One rickshaw driver from Anhui Province, who had no home in Beijing at the time of the Olympics in 2008 and either slept in his rickshaw or on a bench at the Forbidden City, told the New York Times, “The only happy thing is to have money. You don’t have bitterness. You don’t have to feel tired.”

The people in the countryside who have failed to profit from the economic reforms are perhaps the one who look back on the Mao years with the most nostalgia. Dissident Liu Binyan wrote in Newsweek, "they feel that though life was hard in those years, it was more or less egalitarian, and people had the right to, moreover, to stop the wrongdoing of bureaucrats. But now the gap between rich and poor is growing wider and wider. Millions of workers in state owned factories have lost their jobs or are only partially paid. Retirement pensions are constantly in arrears. The peasants have been suffering under increasing financial burdens, sometimes including extortion at the hands of local officials. Corruption and abuse of power have run wild."

Many poor Chinese abhor the new millionaires who exploit tax breaks, child labor and financial privileges to get rich quick. "Red-eye disease" describes jealousy brought about being left out but seeing others gett rich quick. One orange farmer in Hunan told Time, "Rich entrepreneurs spend the equivalent of my annual income in one night at a karaoke bar."

One poor peasant in the Guizhou told the New York Times, " My biggest wish is that government will change its policies and help us to get rich, because living in this kind of poverty makes us too embarrassed to go out of doors."

Contempt (Envy) for People with Expensive Cars in China

Mark McDonald wrote in the New York Times, “There is special contempt — and some envy, of course — for black Audi A6's, Ferarris and Bentleys. Expensive cars serve as symbols of the so-called Great Divide, the widening wealth gap between China’s 1 percenters and everybody else. A recent poll by Renmin University showed that only 5.3 percent of respondents believe the rich come by their wealth legally. The survey was cited in a story in the People’s Daily newspaper about a 24-year-old unemployed man who smashed the windows of two Mercedes-Benzes. “Why can some people drive such good cars,” the man said in court, “and I have to wander on the streets?” [Source:Mark McDonald, New York Times, March 20, 2012]

It was a tragic car accident in October 2010 that gave rise to a notorious addition to China’s sociopolitical vocabulary — the phrase, “My father is Li Gang!” My colleague in the Beijing bureau, Michael Wines, reported about that accident, when a Volkswagen smashed into a college student, a poor farm girl, who later died. Michael wrote: “The 22-year-old driver, who was intoxicated, tried to speed away. Security guards intercepted him, but he was undeterred. He warned them, “My father is Li Gang!”

Li Qiming, the driver, was the son of Li Gang, a deputy police chief, and propaganda officials quickly threw a cloak of silence over the media, as Michael wrote, “to ensure that the story never gained traction.” Quite the opposite happened, however, and the phrase “My father is Li Gang” has become a notorious and bitter catchphrase for shirking responsibility. The author and journalist James Fallows, in his blog “In short,” Mr. Fallows writes, “every exposed raw nerve created by the gaping economic and power inequalities of today’s China was touched by this episode.”

“In April 2012, Mei Fong wrote in the Los Angeles Times, After USC graduate students Ming Qu and Ying Wu were shot and killed earlier this month, the Chinese student community in America was saddened, shocked and frightened. The reaction back home was very different. The killings, which happened while Qu and Wu were sitting and talking in a BMW, unleashed a torrent of Internet vitriol in China, and it wasn't directed at the pair's attacker. A comment on the popular site was typical: "Studying in America, driving BMW, a male and a female, let them die." Another commenter on posted this: "We should think about why a lot of families, even the poor ones, spend a lot to send their children abroad. This is meaningless. Studying abroad only contributes to American GDP. Stop cheating us." [Source: Mei Fong, Los Angeles Times, April 26, 2012]

“Never mind that the BMW was a secondhand model and not the $60,000 luxury model the Associated Press erroneously reported initially. Or that Qu and Wu were not especially rich or well connected: Qu's father is a manager at an insurance company, his mother a teacher. Wu's father is a police investigator and her mother a retired textile worker. The malevolence this tragedy generated grows out of deep divisions within China. The chasm between haves and have-nots is growing ever wider, and with it has come resentment that extends to the approximately 160,000 students a year — enough to populate three schools the size of UCLA — who elect to study in the United States.

Efforts by the Chinese Government to Close China’s Income Gap

China’s long-term solutions to reduce the income gap include more market reforms, stronger social security programs, lower taxes on low-income families and tighter controls on illicit income. Sharon Lafraniere wrote in the New York Times, "But while waiting for Beijing for all that, some local officials are looking for ways to gloss over the gap. A regulation posted in March 2011 on the Web site of the Beijing Administration for Industry and Commerce banned outdoor advertisements promoting “unhealthy” tendencies, including “hedonism, feudalism and royalty, worshiping of and groveling before foreign things, supreme aristocracy and vulgar tastes.”

Beijing is attempting to tackle the income disparity problem by implementing a more progressive tax system and cutting taxes for the poor while closing loopholes and preventing cheating by the rich. In a New Year speech in 2007, China’s leader at that time Hu Jintao said he was committed ending the gap between the rich and poor. By then there had been a shift in focus in policy with the government saying that it was just as responsible for improving the quality of life as it was for delivering economic growth. In December 2007, the Chinese government announced that it would subsidize the purchase of appliances by farmers to help narrow the income gap. In the first stage of the program farmers in Shandong, Henan and Sichuan Provinces could buy cell phones, televisions and refrigerators, with government footing 13 percent of the bill.

At the National People's Congress in March 2011, Chinese Premier Wen Jiabao pledged to place the country's have-nots at the heart of its development goals for the next five years. In his address at the opening of the congress Wen promised to ensure social stability by curbing inflation and raise the incomes of those left behind by China’s spectacular growth. "We must make improving the people's lives a pivot linking reform, development and stability," said Jiabao, in his annual work report. "And make sure people are content with their lives and jobs, society is tranquil and orderly and the country enjoys long-term peace and stability." [Source: Tania Branigan, The Guardian, March 5, 2011]

Yang Yiyong, director of the Social Development Research Department at the NDRC, says one solution to the problem is allowing the free mobilization of labor and the implementation of equal pay for equal work, both of which are hindered by the current household registration system, or hukou. Before he became Li Keqiang suggested urbanisation could "pull up" the countryside as a smaller number of farmers consolidate land, leading to increased productivity — though much farmland is being lost to development. Despite all this the best prospect for most farmers remains moving to the cities. There have promising pilot projects that attempt to tackle the urban-rural gulf: improving education for poorer children and increasing integration. .Cities such as Chongqing and Guangdong have been experimenting with limited hukou reform. [Source: Tania Branigan, The Guardian, October 2, 2011]

In February 2013, Chris Buckley wrote in the New York Times, “The Chinese government issued a long-awaited plan to narrow the gulf between rich and poor, offering broad vows to lift the incomes of workers and farmers and choke off corrupt wealth but few specific goals to rein in the nation’s wide inequality. 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 businesses 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. [Source: Chris Buckley, New York Times, February 5, 2013 ^^]

“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 plan was drafted by the National Development and Reform Commission and other central agencies. The income distribution plan was an initiative promised by the departing Chinese prime minister, Wen Jiabao. But it also underscores the extent to which the new generation of leaders under Xi Jinping has promised to expand state spending on health care, education and social welfare. ^^

“The income plan, however, does not offer specific new initiatives to reduce corruption. Beyond a general commitment to eliminate sources of illegal income, the plan says that officials must abide by already announced rules to report earnings and assets to superiors. Many experts, however, have said such rules are ineffective without public disclosure as well. The new plan also says that by the end of 2015 state-owned corporations under central administration should increase the returns they pay the government by five percentage points, with the additional payments to be used for social welfare. “Deepening reform of the income distribution system is an extremely arduous and complex task of systemic engineering,” the new plan says. “It cannot be achieved in one step.” ^^

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Chinese government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

Last updated October 2021

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