The GINI’s out the bottle

8 Apr

 

China’s rapid industrialisation over the past 3 decades is presently showing the negative effects it has induced. The previous peasant, rurally centred economy has been transformed into a strictly urban industrial economy centred round energy and technology. This, as anticipated, has had a severe impact upon rural areas, and rural inequality in China. China released a GINI coefficient of 0.47, higher than most developed countries, and considered very high, but it is thought the actual GINI coefficient is closer to 0.61, the highest for any country not run by a dictator. The initial thought that the benefits would trickle down into these rural regions have been proved incorrect, with the emerging middle class taking most of these benefits, not reaching  rural regions. This case of inequality poses significant problems for a country run under communist leadership, contradicting their manifesto.

The disparities between urban and rural regions are further increasing, giving the Government much cause for concern. The ‘35 point plan’ has been designated to address these aforementioned issues. Within these 35 points includes: income distribution plans, state owned enterprises to pay more into public coffers, liberalise interest rates, increasing minimum wage, improving health care and pensions. These points are respectable on paper, but the implementation of them remains to be seen. Seeing as China has such vast rural areas, the implementation to out of reach regions is certainly a challenge. Another sector to be drawn upon is increasing tax upon the rich. This, as many other points is certainly valid, but Governments are often wary of implementing it, due to fear of the rich fleeing the country, which could certainly have potential downfalls.  

The debate as to whether China’s economic growth was at a price worth paying is ongoing, but inequality in China, and certainly urban rural disparities are certainly an issue that need addressing. The figure below displays urban disposable income compared to rural net income. The dramatic distinction between the two clearly implies actions needs to be taken   

     Image

 

Sources:

http://www.bbc.co.uk/news/business-13945072

http://www.economist.com/news/finance-and-economics/21568423-new-survey-illuminates-extent-chinese-income-inequality-each-not

http://www.ft.com/cms/s/0/e5e12096-71ef-11e2-886e-00144feab49a.html#axzz2PsQF7lim

http://www.reuters.com/article/2013/02/05/us-china-economy-reform-idUSBRE9140QL20130205

http://www.theatlantic.com/international/archive/2013/01/what-chinas-newly-released-inequality-data-really-means/272653/

 

 

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