In recent years, China’s economic growth has been staggering, as at January 2018, the growth rate achieved was 6.8% (Trading Economics, n.d.). However, behind all the glorious numbers achieved, lies a very serious problem – Social inequality. Between the year 2005 and 2016, a study carried out by Statista has shown that around 1% of the population in China possess 1/3 of the country’s wealth and the Gini coefficient as at 2016 was 0.465(Statista, n.d.), which is above the danger level set of 0.4. In this essay, I will identify the causes of this problem and what will be the consequences if not dealt with.
The uneven distribution of wealth in China has mainly been caused by the uneven development plan of the government, the three issues of Rural area and the difference in the education system between different areas in China.
The wealth gap of China has mainly been caused by the uneven development plan of the government back in the 80s and 90s. Back then, the economy of China was not really ideal, The Cultural Revolution affected the development of China’s economy in the late 60s, with almost all professionals laid off either by imprisonment or deportation to the countryside to participate in labour work. Then there was a reform of the economic system which started almost 10 years after The Cultural Revolution in 1978, in which at the time, China was pathetic, people were down to a level of survival with insufficient food and clothing. The real change came in 1982, which was the period of “Reform and opening”, the policies at the period were mainly focusing on the flexibility, autonomy and opportunities for the people.
Some specific regions have also received a special treatment until present days, which are the followings, Shenzhen, Zhuhai, Shantou, Xiamen, Tianjin, Shanghai and Guangzhou (Oizumi, 2010). These are all coastal regions where foreign trades have been promoted for the economic development of China. It however, despite the success of the Reformation, created the most important problem of all time, the inequality in China, this has already been the problem for 3 decades since 1987. One of Deng Xiaoping’s most famous quotes was “Let some people get rich first” (Zhou, Song, 2016) did in fact come real, however, what about those who did not “get rich” at the first place? In the 2000, the situation of income inequality of urban and rural household in China can be seen through this chart from the National Bureau of Statistics of China.
As we can see in the chart, the urban households’ per capita annual disposable income which had a yearly increase of 561.043 Yuan was around 2.5 times the rural households’ per capita annual net income which had a yearly increase of 167.32 Yuan from 1978 to 2009. And we can see that the Engel’s coefficient of both rural and urban have decreased over the years, with urban households, we had a yearly decrease of around 0.7%, while for rural households at 0.89%, however, the difference of the Engel’s coefficient of rural and urban was 4.5% as at 2009. This shows us that while both the rural have significantly increased income, the urban people earned more than their rural counterpart while spending less on daily necessities than their rural counterpart, in short, despite the increase in income and the decrease in Engel’s coefficient, the rural households still could not keep up with their urban counterpart in terms of their disposable income.
The second reason for this problem is the “Three Rural Issues”. The three rural issues are Agricultural, Farmers and Rural areas. (Chow, 2006) Agricultural problem is referring to the production method of the agricultural products, since the reform and opening up, China’s agricultural products have not been able to rival their European and American counterparts due the lack of industrialisation of their production methods, which resulted in the low competitiveness in the global agriculture market, thus, low income of the farmers.
The second issue is farmers, this problem is mainly about the safeguard of farmers right, the financial burden of farmers and the quality of the farmers. Farmers often have to pay very high tax, as local governments prevent farmers from selling their product on the market, namely those corrupted and bankrupted ones. This means that the farmers have insufficient resources for a decent quality of life. (Hays, 2013) The last problem is Rural problem which is about household registration system, which will be explained later. All of these issues deter the younger generations to work in rural areas, therefore they migrate toward the urban cities in order to seek a better life. Back in 2009, there were around 145 million rural-urban migrations in China. (Hu, 2012)
This means that there are fewer people in the rural area, and hence hinders the development of rural areas, further worsens the rural-urban disparity, as the development of the area is positively related to the income of the people. There are a few motivations for young people to move from rural to urban, namely the opportunity for a better income and curiosity. (Hu, 2012) However, migrant workers from the rural often find themselves working in poor conditions, having low income despite being in the city and also treated harshly by their employees, this can be explained by education inequality.
The last reason for this problem is about education inequality. When we talk about education inequality in China, we have to first talk about the “Hukou System”, it is a household registration system implemented by Mao Zedong in the 1950s in order to maintain the stability of China during its development. This system is to register a person to his/ her local government authority in which the local government authority is to provide health care, education social security and rights. (Project Partner, n.d.) But often times, the government in rural areas are not able to provide quality service for them, for example, education, the government doesn’t have enough resources to support the education sector in rural areas, leading to a low-quality education in rural areas, moreover, while urban schools are able to employ foreign teachers and afford some advanced education systems, rural schools are struggling to keep their building standing. (Gao, 2014)
Making people from rural areas a lot less competitive, as they are not equipped with the essential skills to deal with the modern living environment of that in the urban areas. As mentioned above, a lot of youngsters from rural areas have migrated to urban areas in seek of a better living, better income and more opportunities, however, in reality, it is a different story. Once they arrive in the urban area, they are being looked down at, despite being willing to work at harsh conditions and have a strong determined mind to make a living in the urban area, making them much harder to climb up the social ladder because of their low skill characteristics.
Furthermore, as they have left their original areas that they had registered, they are not able to enjoy the benefits from the government such a free-education, medical, rights, and social security. Sometimes migrant workers are not even able to spare money to send home because of the inflation rate and interest in the urban area. This leads to an inter-generational poverty which the status of poverty is inherited to the later generations.
These are the reasons that have cause the inequality in China, which greatly hinders the social harmony and the social integrity as a whole, despite the rapid economic development of recent years. And if this problem is not dealt with in the future, it may result in a civil unrest and the discontentment towards the ruling party.
When the society is suffering from a huge income disparity for a prolong period, people with start to express hatred towards the rich people, as they have the ability to turn the table around and benefit the less fortunate people in the rural areas. This will possibly turn into a class warfare, with increasing crime rate, for example, stealing, murder etc… The rich people will also have political advantages (Birdsong, 2015), take Hong Kong as an example, one of the things keeping Hong Kong’s economy alive is its property market where the government gains a lot of tax revenue, in 2015, 74.8 billion dollars of the total tax revenue came from stamp duty and 137.8 billion dollars came from profit tax.
Since the main income for the government relies on these high profit businesses, entrepreneurs from these fields will have the bargaining power to influence the government’s policies. This same logic can apply to China, the government in China will try to ease of the regulations in order to make some certain industries more profitable, namely technology. People in rural areas may therefore think that the central government does really care about people in the rural area and hence stimulating their discontentment. In 2011, US had a similar experience with the Occupy Wall Street movement which was aimed against economic inequality, this kind of movement in China may not exist explicitly, but it will probably have an influence in the heart of those who are less fortunate if income inequality continues to worsen in the future.
