China – The Growing Inequalities

“The China’s income gap becomes an increasingly serious problem at the present stage” write Lei SUN and Ying-jun SUN in Analysis on China’s Income Distribution at the Present Stage. (Chosen excepts by JMM to follow) It appears not only between the urban and rural residents, but also among different fields, different areas and so on.

The paper analyses the reasons that cause the serious situation, puts forward some advices to deepen reform of the system for income distribution. It is significant for the authorities to reduce the income gap and improve the existing situation.

• China’s income distribution 

In 2010, China’s urban and rural residents’ income has a substantial increase in the per capita net income of rural residents reached 5,919.0 yuan, a real growth of 14.86% over the previous year; capita disposable income of urban residents reached 19,109.4 Yuan, a real growth of 11.26%. But as incomes rise, the gap in income distribution has become increasingly serious; the income gap has significantly increased, mainly in the following areas:

• The urban and rural residents’ income disparities

China has the world’s highest income gap between urban and rural areas, the overall income gap of Chinese residents to a large extent explained by the gap between urban and rural areas.

Fig 1

As can be seen from Figure 1, the urban-rural income gaps in China since the reform and opening-up since change trajectory. 1978, the income gap between urban and rural areas was declining, the lowest point of 1.82 in 1983 reached nearly 30 years, and thereafter maintained for two years and continue to rise. Appeared in 1994 a decline stage low of 2.47 in 1997, and then until 2003, the income gap between urban and rural areas is fast rising, reaching 3.23. Since 2003, the value is slowly rising phase, 3.33 in 2009, but also after the founding of the history of the highest value, declined slightly in 2010, to 3.23. The middle part of the year had dropped, but the overall trend is upward.

• The income gap between industries

Figure 2 is a wage coefficient of variation of some of our industry 1978-2010. In 1992, the industry wage gap began to expand, so far, the trend has been upward.

Fig 2

Industry income gap in this century and then gradually caused widespread concern. Industry income gap is mainly reflected in: monopoly industries and non-monopoly industry workers, the income gap is too large, excessive monopoly industry workers; emerging industry and traditional industry workers, the income gap between the income levels of the emerging industry workers, faster growth; knowledge, capital-intensive industries and labor-intensive industry workers gradually expanding income gap, the higher the income of workers of the intellectual and capital-intensive industry.

China’s income gap Cause Analysis

There are many reasons for the widening income gap in China: uneven economic development gap between regions, urban and rural income distribution; market economic system brought about by the development of competition caused by the industry, the gap between personal income distribution; create a monopoly of the government division of responsibilities is unclear, lead the income gap between the industry; same time, the state in taxes, transfer payments, spending on education, social security system and other aspects of a problem, lead to further China’s income gap gradually widened. Below are analyzed from several aspects.

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