Gross domestic product per capita is now more than US$4,000. China’s estimated GDP in 2010 was RMB39.8 trillion (US$6 trillion), representing a 10.3 per cent increase when compared with 2009. State revenue was RMB8.3 trillion (US$1.3 trillion) — an increase of RMB1.45 trillion (US$0.21 trillion), representing a 21.3 per cent increase when compared with 2009.
The net per capita income of rural residents is now RMB5,919 (US$913), having increased by 10.9 per cent since 2009 in real terms. Urban per capita disposable income is now RMB19,109 (US$2,949), a real increase of 7.8 per cent. Food consumption expenditure as a proportion of household expenditure in rural and urban areas for 2010 totalled 41.1 per cent and 35.7 per cent respectively. At the end of 2010, the impoverished rural population was 26.8 million — a decrease of 9 million since 2009 if we use the rural poverty standard of 2010.
Income and standard of living continue to increase each year. But, unfortunately, the income gap between different social classes is also widening. This trend appears not only between rural and urban areas, but also between different industries and sectors. The income gap can be seen in statistics. First, the share of GDP accounted for by wages has decreased year by year. Second, the income gap between rural and urban areas is also very wide. Third, the income gap between different industries is growing. Finally, the income gap between different stratums is growing. According to measurements by the World Bank, the Gini coefficients of Europe and Japan are generally between 0.24 and 0.36. China’s, on the other hand, has risen to 0.47. This is higher than the internationally recognised warning limit of 0.4.
To reverse growing income disparity and level up people’s incomes with economic growth, payment for labour needs to match growth in labour productivity. Increasing household income as a proportion of the national income and increasing the proportion of the GDP accounted for by payments to labour are urgent objectives in the 12th Five Year Plan.
An ineffective income distribution system is the primary cause of the increasing income distribution problems. It is imperative that China accelerate reform of the income distribution system, adjust the structure of income distribution, expand the middle class’s share of national income, increase the income of farmers, and establish a reasonable income distribution system.
Cao Xin is Professor in the Department of Economics, Chinese Central Party School, Beijing.
This article was published in the most recent edition of the East Asia Forum Quarterly, ‘Governing China’.
I need to state that I am not an expert on income distribution both on time series and on cross countries. I was wordering, however, whether economic/income growth should be taken into account to judge income distribution in terms of Gini coeffecients.
When two economies are having very different growths, the same level or change in their Gini coeffecients may have different implications for the disadvantaged in their respective nations/peoples.
This could be a very interesting empirical research topic to see if growth has an impact or not.