China’s GINI Coefficient Progress

China’s GINI Coefficient: Progress?

What’s China’s GINI Coefficient Progress? The National Bureau of Statistics says the country’s Gini coefficient was 0.474 in 2012. Ma Jiantong, director of the bureau, says that the number is very close to the World Bank’s figure. The coefficient has dropped since 2008, when it was 0.491, but was still at a level experts say is worrying. A Gini figure of 0 indicates perfect equality, while 1 indicates maximum inequality. While the decline in the Gini coefficient indicates reforms are helping to narrow the income gap, Ma says that the government still has work to do. Read the original article on Caixin.

So while our inequality continues to rise, theirs is falling. And while our incomes continue to fall, theirs are rising (Chinese people’s purchasing power is doubling every 10 years).

A recent editorial in The Economist spoke in faux-worried tones about China’s growing inequality and the instability that this could cause in the country. Seriously?

“Growing inequality” has been at the forefront of China’s collective mind since Deng warned everybody, repeatedly, in plain language, that they would suffer this scourge of inequality as a consequence of his opening up policies. As a result, those Chinese who remember Deng’s warning – and most do – may feel somewhat impatient with the government’s slow (but already measurabe) progress in righting this imbalance.

To imply otherwise is to simply mislead and mischaracterize the current situation. Which, when you think about it, appears to be the raison d’etre of Western media coverage of China.

One fruitful approach (and there are many being taken simultaneously) is to focus on raising farmers’ income, which are currently only about one-third of urban earnings. Here’s an article which supports the Government’s claim that their GINI is already improving:

Raising China’s rural income a tough row to hoe
WANG Zhiren, a farmer in the agricultural province of Jilin, does not know what the word “middle-class” means. However, Wang’s life is typically middle-class: he lives in a three-bedroom house with a garage, drives a sedan and shops in urban department stores.

Wang’s family earned 100,000 yuan (US$16,090) last year from growing rice.

Many hope that emerging rural consumers, such as Wang, will unleash their purchasing power as urbanites did during the last decade, since China urgently needs to shift its economic driving force from investment to consumption.

The income gap between urban and rural residents narrowed in the past few years, bringing down the urban-rural earning ratio to 3.13 in 2011 from the 2009 reading of 3.33.

Twenty-nine out of 31 provincial-level governments reported that the income growth of their rural residents surpassed that of urban dwellers for the January to September period last year.

China held its annual Central Rural Work Conference in December, one month after the 18th National Congress of the Communist Party of China (CPC) elected its new leadership.

Agriculture Minister Han Changfu told Xinhua that the conference pledged to put more efforts into boosting farmers’ earnings in the “income doubling program” promised during the 18th CPC national congress. The five-yearly congress adopted a resolution saying that by 2020, the country’s per capita income should be double that of 2010.

While the exemption from agricultural taxation and increasing government investment have advanced the rural economy for the several years, countryside residents still face great difficulty in maintaining momentum in income growth.

Farmers in Qionghai in the southernmost island province of Hainan, China’s major tropical fruit supplier, can make 40,000 yuan on average a year.

Market volatility
However, Lei Zhen, deputy director of Qionghai city’s agricultural bureau, said farmers remain vulnerable to natural and economic risks, adding that market volatility can easily erase earlier profits.

China’s dim export prospects also cast shadows over the prospects for rural income growth. For most rural families, the main income source is wages earned by working in labor-intensive industries, many of which rely heavily on exports. The European debt crisis and the US’s unstable recovery continue to threaten the survival of the factories that absorb vast rural labor. China’s year-on-year export growth slumped to 7.9 percent in 2012 from 20.3 percent a year earlier.

Labor-intensive factories want to move up the value chain by upgrading technology and changing products, according to experts, but their rural migrant employees are not skilled enough to become technical workers. The lack of property income is another problem for rural residents. Chinese farmers are not allowed to sell their property to urban residents.

However, many analysts, betting on China’s fast urbanization, are optimistic about rural residents’ income growth in the long run. China’s rapid economic growth fueled the world’s largest urbanization. According to a nationwide census in 2010, half of the Chinese population lives in cities, up by 13.46 percentage points from 2000. Chi Fulin, president of the China (Hainan) Institute for Reform and Development, estimates that 400 million rural residents will move to cities by 2020, and 160 million of them are likely to become middle class. Original article in The Shanghai Daily.

UPDATE

China’s income inequality slowly improving, survey finds | South China Morning Post China’s Gini coefficient of income inequality was 0.49 last year, slightly down from 0.51 in 2010, according to the China Development Report on People’s Livelihood 2013 based on the China Family Panel Studies. This is a research project of the Institute of Social Science Survey at Peking University. The study’s researchers interviewed 14,960 households representing 57,155 people…Despite a softening Gini index, the China Family Panel Studies figure also confirmed a staggering income gap, with the top 5 per cent of households’ income last year being 234 times that of the lowest 5 per cent, whose annual per capita income was about 1,000 yuan (HK$1,250).

That’s a great link. Thanks. Nobody likes inequality, because it’s usually a symptom of unfairness – and the Chinese are no different. But their feelings are different from ours because they’ve been expecting this wealth gap. When he announced the reform and opening up policy, he warned everyone that one of the ‘flies and mosquitoes’ that would get in when he opened the windows was that “some will get rich before others”. That’s the nature of Capitalism, he explained. Another reason that the Chinese are not to concerned is that a huge wealth gap has existed for thousands of years between the inland and coastal provinces: so people inland all got ‘rich’ at the same pace as their neighbors as did the coast dwellers: they didn’t notice much of a GINI gap when they looked at their neighbors.

The main reason they’re not worried, though is that they’re expecting the government to handle it as it promised to do back in 2012. I’ve been waiting to see the effects of the government policies to kick in and the Allianz report, below, is the first time I’ve seen signs that it’s happening. As I read the report, China’s Gini gap has narrowed by 5% lately.

Allianz has 2015 figures for both China and the USA:  “For the first time in this report series, Allianz Insurance calculated each country’s wealth Gini coefficient — a measure of inequality in which 0 is perfect equality and 100 would mean perfect inequality, or one person owning all the wealth. It found that the U.S. had the most wealth inequality, with a score of 80.56, showing the most concentration of overall wealth in the hands of the proportionately fewest people.

In comparison, when the Organisation for Economic Cooperation and Development (OECD) examined income inequality, it found that the U.S. has the fourth highest income Gini coefficient — 0.40 — after Turkey, Mexico, and Chile. Still, it’s important to note that despite all the research documenting America’s ballooning wealth and income inequality, there isn’t any consensus about how the gap affects Americans; and surveys show that Americans’ support for redistribution of wealth isn’t increasing, either.

Here’s the list of the countries with the highest wealth inequality, according to the Allianz report.

U.S.A. — 80.56

Sweden — 79.90

U.K. — 75.72

Indonesia — 73.61

Austria — 73.59

Germany — 73.34

Colombia — 73.18

Chile — 73.17

Brazil — 72.86

Mexico — 70.00

[China’s 52.23 – and falling] More..

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