While a growing number of Chinese people are enjoying the benefits brought by economic reform and social development, some are being left behind. The divide between the rich and the poor is widening in China, resulting in an increasingly dissatisfied populace. Some argue that a wealth gap is not a big deal in a market economy and that the problem in China has been exaggerated. But in an article published by China Economic Times, Wu Zhongmin, a sociology professor at the Central Party School of the Communist Party of China, points out that China’s wealth gap and its impacts are far more serious than people may think, taking into account some hidden factors. His main ideas follow:
Surely we cannot just use a single index, like the Gini Coefficient (which is a measure of inequality in a population, ranging from a minimum value of zero, where all individuals are equal, to a theoretical maximum of one), to evaluate the wealth gap in China. For instance, some scholars believe that, taking into consideration the parameter of purchasing power, the current gap between the rich and the poor has been magnified. That sounds reasonable. And there is another parameter which can also help to lessen the gap, that is, compared with smaller countries or regions, a big country such as China, with a high degree of isolation among different groups and regions, has a higher tolerance of the same Gini Coefficient.
However, there are other factors worsening the current wealth gap in China that cannot be overlooked. Objectively speaking, if we think that the rich-poor gap in China today has been exaggerated to a certain extent, then in more cases, this phenomenon and its aftermaths have in fact been underestimated or covered up.
The factors that worsen the wealth gap can be manifested in the following aspects.
First, the gray area in terms of income is too big. Currently, due to incomplete rules, the gray area of the country’s economy cannot be ignored. According to studies by tax experts, in 2002, enterprises across the country failed to pay about 300-400 billion yuan of due tax. So this big sum of money that should have been a public resource instead went to a small group of people. If we also take into account issues such as the underground economy and illegal charges for public welfare services, which are not included in the calculation of gross domestic product, the gray area of China’s economy becomes huger. This has inevitably led to a large gray income, which is mostly to the gain of a small number of advantaged people in society. In this way, the gap between the rich and the poor will surely be worsened.
Now China’s Gini Coefficient has been announced at 0.46. But taking into account the gray income, the number will be more than 0.5. As economist Liu Guoguang pointed out, the Gini Coefficient that has just been published can’t very well include the unreasonable, irregular and illegal incomes that have caused dissatisfaction in society.
Second, the difference in assets among social groups has been rapidly widening. Now people are talking about the wealth gap mostly from the perspective of income gap, almost equating the two concepts. In fact, the difference in assets is also an important component in measuring the wealth gap. Generally speaking, after people solve the problem of food and clothing shortages, they have more and more demands for durable consumer goods and fixed assets such as housing. For middle- and low-income earners, the largely increased expenditures on consumer goods and fixed assets mean a big rise in living costs. But for those with high incomes who already own houses and other fixed assets, they have a stronger cashability of their assets. So, if there is a wide asset gap among people, it will aggravate the inequality that has long existed in society.
Since the mid-1990s, compared with the widening income gap, the difference in assets has been magnified more rapidly. According to a study by economists Zhao Renwei and Li Shi, from 1995 to 2002, the Gini Coefficient regarding personal possessions in China rose from 0.4 to 0.55. If we also take into account the sharp increase in housing prices in 2002-05, the wealth gap between high-income and low-income groups as well as between urban and rural areas will undoubtedly be more serious.
Third, a large number of citizens lack the basic guarantees for living. After nearly 30 years of development since the reform and opening-up police was initiated in the late 1970s, China’s GDP has ranked fourth in the world and its foreign exchange reserves topped others. But there is a sharp contrast in that China has the lowest proportion of input in social security, compulsory education and public health in its GDP. At present, only 15 percent of Chinese citizens are covered by a medical insurance program, while many are lacking the most basic standard of social security for living. Farmers, the largest group in China, are generally not provided with social security, and many urban citizens cannot afford basic housing. It’s hard to imagine how bad the situation is for the large number of poor people and low-income citizens. This will add to the negative effects caused by the wealth gap, making it hard to realize the purpose of sharing in social achievements or the target of building a harmonious society, and easily resulting in social instability. Obviously, if this situation doesn’t change, China can’t have safe and sound economic development.
Fourth, there are many unfair factors that have caused the widening wealth gap. Objectively speaking, there are two types of reasons for the widening wealth gap: unavoidable historical reasons and irregular factors. From the aspect of historical reasons, the widening gap between the rich and the poor in China is hard to avoid. For instance, economic development has helped a number of new businesses grow, and the people engaged in these businesses generally earn more than those in what we call “sunset industries.” Another example is that before the reform and opening up, Chinese people had hardly any property income apart from a small sum of deposit interest. But since the reform, with more and more investment channels, people’s property income including stocks and housing property has largely increased.
However, compared with these historical reasons, irregular factors are playing a bigger role in widening the wealth gap. An obvious phenomenon is that there is unfairness in opportunities for and treatment of people, such as monopolies, different pay for the same work and abuse of power. Such unfairness has inevitably caused a widening gap between the rich and the poor. So one of the important reasons why the public is unhappy with the wealth gap is that the gap is not caused by differences in people’s capabilities or efforts, but by unreasonable and unfair factors.
Fifth, feelings of anxiety in society worsen the wealth gap and its consequences. China is at a stage of transition, in which people are full of the desire to make a profit, and yet there aren’t any rules to follow; at the same time, the economic and social status of people can undergo dramatic changes all of a sudden, like the numerous cases of people becoming suddenly rich or getting laid off. So, many Chinese people feel there are no rules to follow and they are unsure about their future and feel insecure. The whole society has been filled with an atmosphere of anxiety and impetuosity. This on the one hand has made poor and low-income people feel even more stuck in poverty, and increased the dissatisfaction and dread of many members of society; on the other hand, it has caused a large number of irregularities and has made some disadvantaged groups more inclined to get maximum benefits through irregular means. All of this serves to aggravate the wealth gap.
Sixth, the public is gradually forming an awareness of rights. Historically, the Chinese have attached much importance to fairness. In the 30 years that followed the founding of the New China, equality was a widely accepted basic value of society, though it severely dampened social vitality. Since the reform and opening up, the concept of equality has been transformed to the awareness of equal rights for individuals, in accordance with the market economy. People have much stronger awareness of the importance of defending their rights. Especially with urbanization, rural dwellers are increasingly concerned with defending their interests and rights. It is now written into the Constitution that the state respects and protects human rights. This represents a historic progress. And with the continuing economic development, Chinese people are having higher and higher expectations for their own living standards. So in such a situation, it’s hard for society to tolerate too large a wealth gap, and harder for us to agree with the unequal social status caused by such a wealth gap.
In other words, taking into consideration the abovementioned factors, the wealth gap and its consequences in China now are more serious than previously thought. Ignoring or covering up this issue will hinder the sharing of social achievements, building of a harmonious society and modernization of China.