The Growing Gap between the Rich and Poor in China - Literature review Example

The Growing Gap between the Rich and Poor in China Name: Institution: 8th September, 2013 Introduction Inequality with regard to distribution has become a major issue of concern that is worth giving a considerable public focus in China. The overall income of Citizens in China has continuously grown since the transformation and opening period commenced in the late 1970s. In the intervening time, the income gap stuck between residents in the rural and urban environments has continuously expanded, from a ratio of 1.8:1 in the mid1980s to a ratio of 3.2:1 in the year 2003. In fact, a computation by the World Bank, ‘the Gini coefficient, a gauge of inequality innovated by an Italian statistician named Corrado Gini, was 0.26 and 0.38 in 1980s and 1995 respectively for China. The same computation indicated that by the end of the 20th Century, inequality measurements had exceeded 0.4, thus giving a suggestion that the gap between the rich and the poor, as understood within the international contexts, had grown reasonably big. As Duggan (2013 notes, the Gini coefficient reached 0.61 in 2010 as indicated in the Survey and Research Centre for China Household finance, signalling a risk of disability. Contained in a report titled Analysis and Forecast of China Social Conditions 2004-2005, professionals employed in the Chinese Academy of Social Sciences recorded the widening gap in regard to income as the 2nd most serious of the 6 problems that residents of China are facing. In the report, it is indicated that such widening income gaps have been noted in not only individual employees within the same profession, but also those that are employed in different industries and regions within the country. A detailed understanding of the causes of this continually expanding gap between the rich and the poor in China is therefore imperative in preventing any future occurrences of inequality. Causes of the Widening Gap between the Rich and Poor in China Weihua (2013) points out that China used to be an egalitarian society before it began its reforms and drive to open-up its markets in the era of the 1970s. This could be a major cause of the widening gap because the Gini ratio at that time was constantly below 0.2. The situation has therefore worsened due to lack of reforms in the income distribution system. As Weihua (2013) notes, in the period of 1980s the top 10% of the Chinese population earned 7 times more than the bottom 10%. This illustrates a clear disparity in the distribution system as currently the top 10% of the Chinese population earn 25 times more than the bottom 10% population according to the reports of the Chinese Household Finance and China’s National Bureau of Statistics of 2013. It is therefore clear that in China, the income of top ten percent population is rising at a rate that is very high while the incomes of the typical families barely budge. This trend could be as a result of recession in the constantly developing economy of China, thereby holding the disparity in incomes constant instead of alleviating the difference. A World Bank report in 2004 in China indicates that there is a big difference between towns and China’s countryside which is a major cause of the widening gap between the rich and the poor. Such differences led to the income gap that was experienced in the mid and late 1990s. This point fingers towards differing distribution of resources in the rural and urban settlements as a major cause of the disparity. As such, the rural Chinese populations have difficulties accessing employment as most employing companies or institutions are based in urban areas. Secondly, there are notable differences between the rural areas in different regions in China. China underwent a process of liberalizing its trade in Agricultural products in the early ages of 1990. This came at a time when international and local or domestic prices for agricultural products were mutually going down. Consequently, farmer’s income in the provinces that were predominantly agricultural grew at a slow rate or even worse registered growths that were negative. These two factors have therefore led to the constantly widening gaps in terms of income between the rich in urban areas and the poor in rural areas, and similarly the difference between the incomes of farmers in rural areas that are located in different regions. The income gap in China has also been illustrated as widening between different urban regions. Since the late periods of 1990s, a large number of Chinese employees have been laid off, therefore worsening the situation. Chinese workers that were laid off from government or state and collectively owned organizations or enterprises resulted in a population that was stricken with poverty in the era of social transition. Similarly, there has been a major difference or widening gap in regard to the revenue collected by provincial governments in China. Since provincial governments collect revenues that vary, it is possible that urban provincial governments could be paying their workers more than what other employees in rural provincial governments earn for a living. As such, it is an obvious result that employees would have major differences in their incomes. This is a likely scenario to arise since the systems that are used for taxing in provinces that are located in different regions vary, and as a result, their revenue collections have to vary. If the same taxing systems have to be used in the future, then income disparity would still continue being a nightmare in China. Duggan (2013) reports that there are restrictions in China that keep small and medium sized companies from entering high-profit business sectors. When companies are restricted from doing businesses that would raise their profits, their employees are similarly going to earn meagre incomes. When comparisons are made between them and those in large corporations, then there is a likelihood that their incomes would differ by great margins. In addition to this, China has recorded discrimination in regard to employment (Duggan, 2013). Whenever discrimination exists in the employment sector then citizens in a state like China end up having unequal opportunities to be employed. With unequal opportunities, then the powerful and the mighty in the community end up taking advantage of the opportunities that is available since they have the capacity to manipulate processes and gain favors from employing corporations. Regional differences point out that inequity may have increased between China’s east coast, where the major cities such as Shanghai and Beijing are situated, and the countryside interior (Duggan, 2013). As a report by the Chinese Academy of Social Sciences illustrated in early 2013, students in an area of Huebei Province had to avail their own desks for use in school, which indicates a clear contrast between them and the air-conditioned schools that are located in China’s largest cities. As such, this difference is a good indication that there are regional differences that are worsening the situation. This gap that exists between rural and urban regions is approximately 26% higher than in the year 1997, and 68% higher than what was recorded in 1985 in the report given by the Chinese Academy of Social Sciences (Mackinnon, 2013). Rural to Urban migrations in China is also a major cause of the disparity that exists between the rich and the poor in China. More than 50% of China’s employees are currently residing in urban areas, as most of their rural migrants move to their major cities of Shanghai and Beijing while looking for better employment opportunities. Duggan (2013), reports that the official figures illustrate that currently a majority of about 252 million migrant employees currently live in the cities of China. China’s household registration system, also known as hukou, does not give them the right to access healthcare, free education, or pension, thus leading to the widening income gap between citizens in China. In fact, hukou divides Chinese citizens into urban and rural residents and does an allocation of public services in view of that, therefore leading to discrimination in regard to public resource distribution (Walker, 2013). This divide between rural and urban Chinese (hukou) is actually a major factor that causes the inequality that is worsening in China since it produces a caste-like system. The result is that most of these migrants, 150 million or so, are forced to save their wages to cover their retirement and medical expenditures in the future (Roberts, 2011). As prices of housing continuously rise and food prices go up due to inflation, the incomes of migrants are pinched even further thus being pushed towards greater disparity. Further to this, China is a country that has a little income transfer, therefore contributing largely to the level of income inequality (Duggan, 2013). The Chinese government uses most of its resources to build investment infrastructure instead of having a priority to spend more of their revenue in improving income transfers and developing social welfare programmes (Ping & Yuanhan, 2010). Since the Chinese government only makes use of a taxing system that taxes only wages, excluding levies on property and income earned from capital gains on real estate and stock, the gap between the rich and poor has continuously widened (Xiang, 2006). The rich in China are the ones that own a lot of property and if these income sources are not taxed, then most of the poor’s income earnings are reduced even further while the rich accumulate profits that are not taxed. Walker (2013) reports that China is developing at a faster rate than what is possible normal. In the previous decades, China has hit a double digit growth and has been ranked the second largest economy in the world. However, it is imperative to note that China is ranked at position 121 in regard to its wealth per capita, which indicates that its below countries such as East Timor and Jamaica (Walker, 2013). Giving consideration to these figures, it is clear and official that China is still a developing country which develops at a faster rate than the others. As such, the huge economic growth that is taking place in China over the years as compared to those that took centuries in Europe, are seen to be developing an ‘steroids’ (Walker, 2013). This means that the hukou system that is used in China is not being changed with the rapid growth rate that is taking place in the country and as a result, most people that live in the villages in China are continuously finding it hard to survive as they earn approximately £300 pounds annually, while the state’s development program would require that each person hits a target of about US$ 10,000 per head to meet their vision to be a middle income country by 2020 (Walker, 2013). As such, most migrants in town will find it difficult to survive as they will have to stay in overcrowded accommodation systems, distance from their employment areas and in addition fail to access descent medical care or schools (Walker, 2013, Duggan, 2013). China is currently run by the Communist Party which is characterized with a lot of corruption (Walker, 2013). Since inequality is the main challenge that faces this party, corruption in the government only makes the situation even worse. As Walker (2013) reports, “There’s a deep suspicion, among most of the people I have spoken to, that only those with political connections get really rich.” As he states, the idea of Guanxi or other known as a network of connections is a renowned and fundamental aspect the Chinese lifestyle, in both the business and social lifestyles (Walker, 2013). As such, even political leaders are appointed in consideration of the links in their families, their fathers as they fight alongside Mao and the party that they are members to. This means that only Chinese citizens with personal and politically developed connections access handed plum employments at state owned corporations. Therefore, most lucrative vacancies in the country are in point of fact bought and put up for sale within individual networks (Liping, 2010). This indicates that there are no clear channels for expressing interest therefore leaving the weak members of the society vulnerable to the effects of lack of standardized models for expressing the interests of the whole Chinese society. Conclusion From the above mentioned analysis, it is clear that China has a vision to change or shift from “a controlled communist economy to opening up to capitalism with the concept that getting rich is glorious.” This kind of an advancing economy with limited changes in the economy means a larger part of the Chinese population are living between a rock and a hard place, meaning that income inequality would remain a reality. For this advancement to remain positive without hurting the population, then causes to the widening gap between the rich and the poor such as unequal job opportunities, discrimination in employment, regional differences, corruption, together with the hukou and taxing system have to be improved. References Duggan, J. (2013, Jan 12). Income Inequality on the Rise in China. Aljazeera.com. Retrieved September 9, 2013, from http://www.aljazeera.com/indepth/features/2012/12/2012122311167503363.html. Liping, S. (2010, December 21). The Characteristics of China’s Growing Gap between Rich and Causes [Web log post]. Retrieved September 9, 2013, from http://onlooker9578.blogspot.com/2010/12/chinas-growing-gap-between-rich-and.html. Mackinnon, M. (2013, January 21). Gap between China’s Rich and Poor Can’t be hidden in Chongqing. The Globe and Mail. Retrieved from http://www.theglobeandmail.com/news/world/the-china-diaries/gap-between-chinas-rich-and-poor-cant-be-hidden-in-chongqing/article7571019/. Ping, Z., & Yuanhan, L. (2010, February 4). Gap Between Rich and Poor Widens in China. The Epoch Times. Retrieved from http://www.theepochtimes.com/n2/china-news/gap-between-rich-and-poor-widens-in-china-28883.html. Roberts, D. (2011, January 27). China’s Growing Income Gap. Bloomberg Businessweek Magazine. Retrieved from http://www.businessweek.com/magazine/content/11_06/b4214013648109.htm. The Economict. (2011, January 20). The Rich and the Rest: What to do (and not do) about Inequality. Economist.com. Retrieved http://www.economist.com/node/17959590. Walker, A. (2013, January 15). China’s Great Growth Means Widening Gap between Rich and Poor. Itv. Retrieved September 09, 2013 from http://www.itv.com/news/2012-11-02/chinas-great-growth-means-widening-gap-between-rich-and-poor/. Weihua, C. (2013, August 8). The Income Gap is China and US’ Common Domestic Foe. China Daily. Retrieved from http://usa.chinadaily.com.cn/epaper/2013-08/01/content_16861545.htm. Xiang, Y. (2006, February 9). Narrowing Gap between Rich and Poor. Human Rights Magazine Retrieved September 9, 2013 from http://www.humanrights.cn/zt/magazine/20040200563104253.htm. Read More