Income inequality in China

China’s current mainly market economy features a high degree of income inequality. According to the Asian Development Bank Institute, “before China implemented reform and open-door policies in 1978, its income distribution pattern was characterized as egalitarianism in all aspects.” At this time, the Gini coefficient for rural – urban inequality was only 0.16. As of 2012, the official Gini coefficient in China was 0.474, although that number has been disputed by scholars who “suggest China’s inequality is actually far greater.” A study published in the PNAS estimated that China’s Gini coefficient increased from 0.30 to 0.55 between 1980 and 2002. China’s current mainly market economy features a high degree of income inequality. According to the Asian Development Bank Institute, “before China implemented reform and open-door policies in 1978, its income distribution pattern was characterized as egalitarianism in all aspects.” At this time, the Gini coefficient for rural – urban inequality was only 0.16. As of 2012, the official Gini coefficient in China was 0.474, although that number has been disputed by scholars who “suggest China’s inequality is actually far greater.” A study published in the PNAS estimated that China’s Gini coefficient increased from 0.30 to 0.55 between 1980 and 2002. In a landmark paper published in the Review of Development Economics, economists Ravi Kanbur and Xiaobo Zhang conclude that there have been three peaks of inequality in China in the last fifty years, “coinciding with the Great Famine of the late 1950s, the Cultural Revolution of the late 1960s and 1970s, and finally the period of openness and global integration in the late 1990s.” Their research indicates that these periods of inequality are driven by “three key policy variables – the ratio of heavy industry to gross output value, the degree of decentralization, and the degree of openness.” The study finds that the “heavy-industry development strategy played a key role in forming the enormous rural-urban gap in the pre-reform period, while openness and decentralization contributed to the rapid increase in inland-coastal disparity in the reform period of the 1980s and 90s.” In other words, heavy industry development in the cities formed the initial rural-urban gap leading up to the reform period, and decentralization increased overall inequality, rural-urban inequality, and inland-coastal inequality as the economy opened up after the 1978 economic reforms. Research conducted by Jeffrey Sachs on the entire period from 1952 to 1996 indicates that in general, regional income inequalities are driven by government policy, whereas income convergence is 'strongly associated with the extent of marketization and openness.' China is an emerging economy, with quarterly GDP growth rates averaging 9.31% for the past two decades, powered mainly by strong exports. However, despite being the largest exporter for world’s demands, China still faces a number of development challenges and one of the most pressing socioeconomic issues is the increasing income disparity between different groups of citizens, largely characterized by rural-urban income inequality. Despite steady growth of China’s economy since economic reforms in 1978, the rural urban income gap reached its widest in more than three decades in 2009. According to data from National Bureau of Statistics of China, at its widest disparity, city dwellers were earning 3.33 times as much as farmers (income ratio of 3.33:1), with per capita disposable income of urban households standing at RMB17175 while per capita net income of rural households at RMB5153. In contrast, the income disparity was at its narrowest in 1983, at 1.82:1, due to effects of the Household-responsibility system introduced in 1978. As of year 2010, income ratio was recorded at 3.23:1 and per capita disposable income of urban households stood at RMB19109 while rural households’ were at RMB5919. In 2014, according to an Institute of Social Science Survey, Peking University, income inequality among Chinese mainland citizens has reached severe conditions, with 1% of the Chinese population possessing 1/3 of the country's wealth. In 2012, a report published by Southwestern University of Finance and Economics think the Gini index in China has arrived 0.61, above 0.5, but when China government don't publish official Gini index, so this data is very controversial. In 2013, the Chinese government published their official Gini index from 2003-2013, According to this report, the Gini coefficient of mainland residents' income is: 0.479 in 2003 and 0.473 in 2004. It was 0.485 in 2005, 0.487 in 2006, 0.484 in 2007, 0.491 in 2008, 0.490 in 2009, 0.481 in 2010, 0.477 in 2011, and 0.474 in 2012, the lowest level since 2005. Since 2008, the Gini coefficient has also been declining year by year, but this result is also controversial. Even considering the policy factors of the Chinese government, the data and actual gaps should be different. In 2017, China's Gini index is 0.476, still in a higher position, also higher than the level of OECD countries.