Ge Yanfeng

Research Report No 82, 2000

I. Manifestations and characteristics of growing disparity in people’s income.

1. Disparity in people’s income is growing rapidly.

It is generally acknowledged by all social circles that disparity in people’s income has grown in all aspects. In a fairly short period since implementation of the reform and opening to the outside world, China has turned from a country where the disparity in people’s income was not great or even quite equal to a country where disparity in people’s income has become quite prominent. Statistics clearly show the characteristics of the rapidly changing disparity in people’s income.

In 1980, when the reform just started, the World Bank estimated that the Gini coefficient for the income of Chinese residents (those living on the mainland, excluding those living in Hong Kong, Macao and Taiwan) was 0.33. This meant that the disparity in general was not great and that people’s income in cities and in the countryside respectively was quite equal. According to samplings made by Zhao Renwei and other scholars, the aggregate Gini coefficient of the urban and rural areas rose to 0.382 by 1988. With the advent of the 1990s the disparity in people’s income continued to grow. According to calculations of the State Statistical Bureau, the aggregate Gini coefficient of the urban and rural areas was 0.424 in 1996, 0.425 in 1997 and further up to 0.456 in 1998.

The above figures show that the disparity in people’s income grew rapidly since the initiation of the reform and opening to the outside world. By the end of the 1990s, the disparity had become enormous. The generally accepted view in the world is that any Gini coefficient higher than 0.40 is within the range of high inequality. Objectively, the above-mentioned Gini coefficient of 0.456 is probably an under-estimation of China’s actual disparity. The real incomes of certain high-income groups are generally greatly underestimated. Their incomes are unfathomable. The incomes of low-income groups are often overestimated. For instance, the total income of quite a large number of rural residents are very low. Furthermore, a large portion of their income must be invested in production, making the portion for consumption undoubtedly even lower.

As the disparity in general income grew rapidly, the disparity in incomes among urban residents and that among rural residents are experiencing clearly different change. In 1980, the Gini coefficient among rural residents was 0.23 and the Gini coefficient among urban residents was 0.16. In 1988, according to samplings made by Zhao Renwei and other scholars, Gini coefficients of urban and rural areas were 0.28 and 0.34 respectively. By 1995, according to data collected by the State Statistical Bureau in the course of resident sampling, the Gini coefficient for urban residents rose to 0.233 and 0.338 for rural residents. In the third quarter of 1999, the State Statistical Bureau in tandem with a number of departments carried out a relatively large-scale survey of the basics of urban residents. Resulting calculations showed that the Gini coefficient for urban residents rose drastically to 0.354. According to a survey conducted by the rural investigation team of the State Statistical Bureau, the Gini coefficient of per capita net income of rural residents in the year 1999 was 0.336. Comparing the above data, it can be roughly seen that the growth of income disparity in the countryside took place mainly in the 1980s. Since the late 1980s, income disparity among rural residents has been basically stable, while the income disparity among urban residents has expanded continuously from the beginning of the 1980s.

2. The division into high- and low-income brackets became outstanding.

The disparity between residents is first of all expressed in the difference of income and of the possession of wealth between different individual members of society (the families), especially when they are divided into high- and low-income brackets. A joint study conducted by a number of ministries and commissions of the State Council in the third quarter of 1999 among urban residents shows that the August incomes of the studied families when listed on a high to low scale in five categories according to the per capita income were as follows: 20% of the high-income families occupied 42.40 percent of the total income; and 20% of the low-income families occupied only 6.50 percent of the total income. Viewing from per capita figures, the situation was as follows: 20% of the high-income families had a per capita income of 992 RMB yuan; 20% of the low-income families had a per capita income of 124 RMB yuan. The ratio between the two was 8:1. The disparity between the per capita income of the 10 percent families with the highest incomes and that of the 10 percent families with the lowest income was even greater， 1,717 RMB yuan and 82 RMB yuan respectively. The ratio was 21:1. The high- and low-income groups in the countryside were similar to those in the cities. 20% of the high-income population occupied over 40 percent of the total net income. Due to the lack of comprehensive data in recent periods, it is not possible to make a comparison between the high- and low-income brackets of the urban and rural areas as a whole. However, it can be assured that the difference, would be even greater.

Not only was the difference between the immediate incomes of residents huge, but under the effects of continued large disparities, the amount of wealth possessed by different families also showed great disparity. According to data supplied by a statistical report issued by the State Statistical Bureau, by the end of June 1999, 20 percent of urban families which possessed the largest amount of financial assets occupied 55.40 percent of the total amount of financial assets possessed by urban residents as a whole. Each of these families possessed an average of 146,615 RMB yuan of financial assets. Whereas, the 20 percent which possessed the smallest amount of financial assets occupied 1.50 percent of the total amount of financial assets. Each of these families possessed an average of 4,298 RMB yuan. The ratio between the two groups was 34:1. A joint survey on the livelihood of urban staff and workers was conducted in 1997 by 6 ministries and commissions of the State Council: the State the Statistical Bureau, Ministry of Labor, All-China Federation of Trade Unions, etc.. It showed an even greater disparity. The better-off families making up 8.74 percent of the total surveyed occupied 60 percent of the financial assets. The 43 percent of surveyed families at the bottom occupied 3 percent of the total financial assets. In the countryside, according to a sample survey conducted by the State Statistical Bureau, by the end of 1998 high-income peasant families which occupied 20 percent of the population possessed 55 percent of the total savings deposit of the surveyed peasant families. However, 14.60 percent of the rural residents whose annual per capita income was less than 1,000 RMB yuan possessed less than 3 percent of the total savings deposit.

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