Why is income inequality an important issue for the Chinese society and its future economic growth?
Introduction
Nowadays, China has become the second largest economy in the world. The GDP (gross domestic product) of china was growing at 9.7% per year in average since 1978, which the year of Chinese “open door” politic founded. China also has become the biggest producer and consumer in many key agricultural and industrial markets and the largest FDI recipient among the developing countries. The performance of china in developing of economy is called “china’s economic miracle”, which be studied by many economists. However, there are also bad results with the development of economy in china such as environment disruption, corruption and
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The Gini coefficients of rural populations increased about 75% and the urban increased about 113% in these 30 years. Moreover, the aggregate Gini coefficient for China reached 0.4 by 2000, which imply the serious income inequality of China in general.
At the same time, the class formation is also getting serious from these 30 years. The income ratios of top 10% urban households was 3 times to the bottom 10% in 1985, but it’s turn to about 9 in 2007, which showed in figure 5.
Figure 5 Income ratios of top/bottom 10% urban households, 1985-2007
Although the income inequality is very serious in china, some economists based on “Kuznets's Inverted U-Curve Hypothesis”, still argue that is good for Chinese economy. The income inequality is the reasonable products of industrialization. They believe that China is in the initial stage of industrialization, so the income inequality is positive to Chinese economy like proving cheap labour force. However, they ignored many serious damage of income inequality to Chinese society and future economic growth.
The damage of income inequality
The rising urban-rural income inequality made a deeper and deeper gap between urban areas and rural areas. In China, with the rapid development of urban
Income inequality can lead to an increase in the productive capacity of resources and so an increase in real GDP per capita. Economic benefits are mainly derived from the incentive effects of inequality. Firstly, inequality encourages the labour force to increase
Since the reform and opening up, the economy of China grows significantly, as an emerging economy, China's economy has made tremendous contributions to the global economy, and Renminbi has become one of the most important currency in the world. According to the survey conducted by China National Bureau of Statistics found that from 1979 to 2012, China has attained an annual average growth rate of 9.8% for its national economy, while the annual average growth of the world economy is only 2.8 % during the same period. In past 30 years, China's GDP surpassed Japan’s, China became the world 's second largest economy, in addition, the huge total volume of trade makes China become the world 's largest trading nation. The contribution of China’s
Gan, Li, et al. "Reducing Inequality: Taking From The Top To Distribute At The Bottom." China Perspectives 2013.3 (2013): 80-82. Academic Search Complete. Web. 29 Oct. 2015. Gan et al. examine the true scope and detail of the income disparity present in contemporary Chinese society. This work examines the introduction of government measures, the criticisms and inadequacies of these supposed measures, other potential solutions that have been proposed, as well as whether or not the Chinese government has the true ability and willingness to carry out the new
Income inequality is the defining issue in this country today; income inequality is an economic danger in the United States, increasing and becoming permanent, reducing social mobility in the U.S. The income and gap between the wealthy is produced by the number one reason for the low and slow economy. Corporations and the top 1 % are hurting the economy and do not seem to comprehend that the flow of wealth is what gives them the chance to make more. Corporations should be hiring more to get more into the flow so that the economy can come back to
In recent years, income inequality has been seen as a bad thing. However, expert economists argue that income inequality is actually not such a bad thing. In fact, America’s economy functions on the basis of income inequality. Research suggests that an increase in income inequality has a significant positive relationship with economic growth and innovation. A study conducted by shows that in the United States, the growth process is accompanied
Income inequality has been a major concern around the world, and it mainly links to how economic metrics are distributed among individuals in a country. Economists generally categorise these metrics in wealth, income and consumption. Wilkinson and Picket (2009) showed in their studies that inequality has drawbacks that lead to social problems. This is because income inequality and wealth concentration can hinder or delay long term growth. In 2011, International Monetary Fund economists showed that less income inequality increased the duration of countries’ economic growth spells more than free trade, low government corruption, foreign investment or low foreign debt (Berg and Ostry, 2011).
Equality or Inequity of IncomeIncome equality or inequality (the Gini coefficient) is computed with reference to the Lorenz curve, which plots the cumulative proportion of the population, ranked by income, on its x-axis, against plots of the cumu-lative share of total income earned by population on its y-axis. The Gini coefficient is twice the area between
Dr. Hao Jingfang works for the China Development Research Foundation which helps advance and promote economic development and social progress. She conducts research with an emphasis on rural poverty and presents recommendations to the government. Dr. Hao has witnessed and learned about China’s development over the last century, such as the Cultural Revolution-the birth of communist ideals- and capitalism. China transformed their system and has been ascending economically for the last several decades. Dr. Hao Jingfang had also witnessed its side effects: the excellent ever increasing gross domestic product(GDP) and the not so good effects of increased poverty. Another one of the of the not so spectacular side effects are how the wealth,
The effects that the economic growth trends and reforms in China have on the rising levels of social inequality have raised debates in the past and have resurfaced today. Some political scientists and economists argue that regional
China is one country where household income inequalities have persisted for many years and have evolved over a period of time. After the beginning of economic liberalization reform process in the late 1970s, many people who belonged to the lower strata of society have been uplifted. The economic growth rate have touched an astonishing rate of 10% per year lifting more than 660 million people out of poverty. There have also been a substantial increase in per capita income which has risen from $320 in 1980 to about $5,500 in 2012 . The number of people who were living on less than $1.25 a day have also declined from 85% in 1980 to about 11% in 2012. Gini Coefficient – the measure of income inequality has also increased from 0.28 in 1980 to 0.44
Since the establishment of the People’s Republic of China in 1949 with its government socialist ideology, planned economy during the economic reforms, which started in 1978 and are still going on until nowadays, China has had continued presence of inequality. In my work I overview the evolution of inequality that could be divided into two historical periods: pre-reform period (1949-1978) and the reform period (1978- onwards). I also examine the correlation between inequality and economic growth in China. Although, with the sustained economic development and increase of living standards for the last three decades, China’s uneven regional development has been a serious phenomenon. During the time of triple transition that includes decentralization, modernization and globalization the nature of regional development and its inequality has been changed fundamentally. Inequality has become the engine of progress; I argue that nowadays inequality in China is unavoidable for future development.
With the rapid development of the global economy, the income gap continues expand between people. In different industries, the misdistributions of income have increased a lot in these years. Under the normal market economy condition, when an industry 's profits higher than other industries, people who work in other industries prefer to transfer to this industry. The Law of value controls the trend of profits and fore it approach average. Therefore, every industry`s profits usually keep in a general level, and the income distribution in every industry will not have a big gap. However, the global economy has developed really fast, and the income distribution of every industry and trade has showed inequality. The income gap between monopoly industries and other low income industries was particularly notable.
In the past three decades, China has experienced dramatically economic growth which is driven by
Over the past two decades, China has experienced rapid economic growth, which has also brought about a rise in social and economic inequality. A nation that once operated under the principle of egalitarianism, China now struggles with a level of inequality that has surpassed most of its East Asia neighbours. In the 1980’s, poverty was a problem restricted mainly to rural areas, but recently it has forayed into urban areas as well. Since the mid-1990’s, urban poverty has grown at a very fast pace under the influence of globalization (Fulong, Webster, and Yuting 5). The economic restructuring of China is a huge contributor to this phenomenon. The Chinese government officially recognized urban poverty as a problem in 2001 through a report
In Guangdong, all of the three poorest counties, Xingning, Dabu and Wuhua are located in Meizhou Muncipality. This widening income disparity between Meizhou and other regions carries in it the seeds of future discontent and could well lead to political instability. The time for action is now. Following Comrade Xi’s message to help people break away from poverty and achieve prosperity, concrete actions against income inequality in Meizhou Municipality are the call of the hour. The key recommendations to bridge income inequality between Meizhou Muncipality and other regions of Guangdong are: (1) Push for equalization of basic public services between urban and rural areas (2) Improve rural infrastructure to create better living conditions as well as a better environment for economic activities (3) strengthen vocational training for rural labourers and improve their ability to be employed in non-farming jobs