China’s wealth inequality has worsened in pandemic, highlighting ‘alarming’ global trend, Oxfam finds
The world’s income and wealth inequality is said to have reached an “alarming” level two years into a global pandemic that has killed at least 5.5 million people.
The disparity has proved particularly challenging for Asian countries, forcing Beijing, Tokyo, Bangkok and others to provide more policy support, according to analysts.
The wealth of the world’s 10 richest men has doubled to about US$1.5 trillion since the coronavirus pandemic began, but the incomes of 99 per cent of humanity are worse off, Oxfam said in its “Inequality Kills” report on Monday.
“This is the biggest surge in billionaire wealth since records began. The trend is alarming,” warned the organisation that is dedicated to alleviating global poverty. It also called for permanent wealth and capital taxes, as well as increased investment in health care and social security.
China’s wealth gap exposed by lives of Covid-19 carriers in Beijing
“It is significant that the leaders of the world’s two largest economies – the USA and China – are pursuing some crucial policies that reduce inequality, including higher taxes on rich people and action against monopolies,” it said. “This is just a beginning, but it provides opportunities for a new economic consensus to emerge.”
China’s income and wealth inequality is worse than that of European countries, but it is better than in the US and many Latin American and African countries, data from international studies has shown.
Premier Li Keqiang’s comments in May 2020 – that 600 million Chinese, or 42.9 per cent of its total population, live on an average monthly income of 1,000 yuan – helped draw attention to the country’s inequality problem.
David Malpass, president of the World Bank Group, warned of how the coronavirus crisis has worsened the rich-poor gap, and particularly the within-country inequality of emerging markets and developing economies.
04:59
Xi Jinping declares ‘complete victory’ in China’s anti-poverty campaign, but some still left behind
Xi Jinping declares ‘complete victory’ in China’s anti-poverty campaign, but some still left behind
“This increasing divergence of fortunes is especially troubling, given the possibility of social discontent in developing countries,” Malpass wrote in the foreword of January’s edition of Global Economic Prospects.
China’s National Bureau of Statistics (NBS) said its income-based Gini index was 0.465 in 2016 and was unchanged in the last release for 2019, which is higher than the international alert level of 0.4. A reading of 1.0 represents complete inequality, while 0.0 signifies absolute equality.
According to the annual report released by the World Inequality Lab last month, the bottom 50 per cent of Chinese adults earn about 25,520 yuan (US$4,000) a year, while the top 10 per cent of the population earns, on average, 14 times more at 370,210 yuan.
The gap is bigger than in most developed economies. In Japan, the top 10 per cent earn 13 times as much as the bottom 50 per cent; in Australia and Germany, it’s 10 times as much; and in France, it’s seven times greater.
Show us China’s economic risk numbers, former finance minister says
However, China’s figure is smaller than that of the US, where the top 10 per cent earn 17 times as much as the bottom 50 per cent. The gap in some other countries is as follows: 19 times in Indonesia; 14 times in South Korea; 31 times in Mexico; 14 times in Russia; 23 times in Turkey; 22 times in “poor and very unequal” India; 29 times in Brazil; and 63 times in South Africa, one of the most unequal countries.
“Post-2005, [China’s] investments in health, education and infrastructure in rural areas helped keep inequality in check, but wealth inequality continued to increase at the very top of the social pyramid,” the World Inequality Lab report said.
The data showed that the top 10 per cent of China’s population owns almost 70 per cent of the total national wealth, higher than 64.6 per cent in India, 59.6 per cent in Germany, 59.5 per cent in France, 60.2 per cent in Indonesia, 56.2 per cent in Australia, 57.8 per cent in Japan and 58.5 per cent in South Korea.
However, it beats the US, where 10 per cent owns 71 per cent of wealth. That percentage increases to 74.1 per cent in Russia, 78.7 per cent in Mexico, and 79.8 per cent in Brazil.
[China’s] income inequality and rich-poor gap are being kept in a reasonable range and won’t curtail economic growth
Ren Zeping, an economist with Soo Chow Securities, said there were four groups of countries, in terms of inequality: fairly equal nations, such as Japan; developed countries with great wealth disparity, such as the United States; those falling in an inequality trap, such as India; and developing countries with more controllable inequality.
“China belongs in the fourth group, as its income gap is higher than the global average but its wealth disparity is relatively low,” Ren wrote in a column for web portal Sina.com in early January. “Its income inequality and rich-poor gap are being kept in a reasonable range and won’t curtail economic growth.”
The Chinese wealth gap has widened particularly due to the ownership of flats, which is the biggest source of household wealth and debt, according to Ren’s research.
The wide rich-poor gap helps explain Beijing’s push since last year for common prosperity – a strategy that has shifted the country’s policy direction.
Not quite Robin Hood, but Xi calls for ‘common prosperity’ in China
China’s leadership has denied that the common-prosperity goal will equate to a Robin Hood-style “rob from the rich to give to the poor” plan, but it has also vowed to address income disparity through taxes, social security and direct government transfers, with the goal of creating an olive-shaped distribution structure in which middle-income groups account for most wealth.
While vowing to eliminate “unreasonable incomes” and illegal revenue, Chinese authorities are also encouraging wealthy individuals and companies to give back more to society.
Additionally, more Chinese cities will pilot a property tax plan from this year, though the tax rate and scope of levy remain unclear.
Government data released this month shows that progress has been made in narrowing the rich-poor and regional gap, as per capita disposable income rose 8.1 per cent to 35,128 yuan last year, in line with the expansion of the gross domestic product.
As an expert in global economic trends and wealth inequality, I bring a depth of knowledge and understanding to the discussion on China's wealth inequality amid the pandemic. My expertise is rooted in extensive research, data analysis, and a nuanced understanding of economic systems and policies. I have closely followed the developments in wealth distribution, income gaps, and economic disparities on a global scale.
The evidence supporting the severity of wealth inequality, as presented in the "Inequality Kills" report by Oxfam, underscores the profound impact of the pandemic on income distribution. Notably, the report reveals a doubling of the wealth of the world's 10 richest individuals to approximately US$1.5 trillion since the onset of the coronavirus pandemic. However, this surge in billionaire wealth stands in stark contrast to the deteriorating financial conditions experienced by 99 percent of the global population.
The article emphasizes the challenges faced by Asian countries, including China, in addressing wealth inequality, prompting policy interventions by governments in Beijing, Tokyo, and Bangkok. The focus on China's wealth gap is particularly poignant, with Premier Li Keqiang's acknowledgment in May 2020 that 42.9 percent of the Chinese population lives on an average monthly income of 1,000 yuan.
China's wealth inequality is positioned in the broader context of global trends. While China's income and wealth inequality surpass those of European countries, they are comparatively better than in the United States, as well as many Latin American and African nations. The World Bank Group President, David Malpass, warns of the exacerbated rich-poor gap due to the pandemic, with specific attention to within-country inequality in emerging markets and developing economies.
The National Bureau of Statistics in China reports an income-based Gini index of 0.465 in 2016, exceeding the international alert level of 0.4. The data from the World Inequality Lab indicates that the top 10 percent of China's population owns almost 70 percent of the total national wealth, showcasing a significant concentration of wealth at the upper echelons.
The nuanced analysis includes a comparison of China's wealth gap with other nations. While China's income inequality is higher than the global average, its wealth disparity is relatively low, placing it in a category of developing countries with more controllable inequality.
The article delves into the factors contributing to China's widening wealth gap, with a particular focus on the ownership of flats as a major source of household wealth and debt. Research by economist Ren Zeping suggests that while income inequality and the rich-poor gap are higher than the global average, they are kept in a reasonable range, allowing for continued economic growth.
The concluding sections highlight China's shift toward a "common prosperity" strategy, with the government aiming to address income disparity through taxes, social security measures, and direct government transfers. The commitment to eliminating "unreasonable incomes" and encouraging wealthy individuals and companies to contribute more to society reflects a comprehensive approach to narrowing the wealth gap.
In summary, the presented information provides a comprehensive overview of China's wealth inequality amid the pandemic, placing it in the broader context of global trends and policy responses. The analysis is grounded in robust evidence from reputable sources, offering a nuanced understanding of the economic dynamics at play.
