Income Inequality in China

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Please cite the paper as:
“Xue, Jinjun, (2013), Income Inequality in China, World Economics Association (WEA) Conferences, No. 3 2013, Conference on the Inequalities in Asia, 27th May to 12th July 2013”

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In 1980, the father of China’s Reform and Opening-up, Deng Xiaoping, put forward the idea that “China should ‘double its national income’” after referencing Japan’s “National Income Doubling Plan”. Since then, the income of Chinese citizens has doubled, or even quadrupled, every 10 years. In the 30 years from 1980 to 2010, China’s GDP grew by 9% annually and in 2010, it surpassed Japan to become the world’s second largest economy. Its export volume has also surpassed that of Germany and become the largest in the world. The IMF predicted (World Economic Outlook 2011 that if China continues its high-speed growth and the US economy stagnates, China would overtake America as the world’s largest economy in 2016, much faster than economists and international organizations have predicted1. Meanwhile, living standard of Chinese people has been better off their GDP per capita increased from US$ 313 in 1980 to US$ 42002, ranked as up-middle income economy. Furthermore, the 12th Five-Year Plan for the National Economic and Social Development, passed by the 11th National People’s Congress in March 2011, proposed that GDP per capita should be doubled again, namely to US$ 8400 by 2015.

However, behind these “lights” there exist some “shadows”. The issues of increasing income disparity, nationwide environment pollution, spreading official corruption, serious conflict between the public and the governments, and so on are some of them. On the other hand, as we knew from international experience that when a nation’s GDP per capita got to $3000 and above, it may entry a transition phase in which some problems such as income inequality, social conflict and political risk will come about. These problems may make its economic growth stagnated and induce the country into an instable situation both in society and politics if the national couldn’t pass through economic and social transition smoothly. Consequently the country may not be able to have a sustainable development and promote its income growth but fall in a “Middle Income Trap”.

China is now on the cross-road of the above transition phase and facing to the “Middle Income Trap”.

This paper will introduce you the process of China’s rapid economic growth and discuss the issue of income inequality using the data sets of China Household Income Project (CHIP) and China Urban Labor Survey (CULS) in addition to the public data of the government. Moreover, the main factors causing these problems will be examined from the aspects of the policy orientation and market factors.

This paper is composed of 5 sessions. Session 2 presents income inequality in China by different measures; Session 3 give an explanation to the Income Kuznets Curve and predicts the future trend of income distribution in China; Session 4 will implies some economic and the social meaning of income inequality for the future development.


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