The Distribution of Household Income in China: Inequality, Poverty and Policies

Abstract

This article examines recent trends in inequality and poverty and the effects of distributional policies in China. After a discussion of data and measurement issues, we present evidence on national, as well as rural and urban, inequality and poverty. We critically examine a selection of policies pursued during the Hu–Wen decade that had explicit distributional objectives: the individual income tax, the elimination of agricultural taxes and fees, minimum wage policies, the relaxation of restrictions on rural–urban migration, the minimum living standard guarantee programme, the “open up the west” development strategy, and the development-oriented rural poverty reduction programme. Despite these policies, income inequality in China increased substantially from the mid-1990s through to 2008. Although inequality stabilized after 2008, the level of inequality remained moderately high by international standards. The ongoing urban–rural income gap and rapid growth in income from private assets and wealth have contributed to these trends in inequality. Policies relaxing restrictions on rural–urban migration have moderated inequality. Our review of selected distributional policies suggests that not all policy measures have been equally effective in ameliorating inequality and poverty.

China’s transitioning class identity

“…But most of the increase in China's income dispersal occurred in roughly the first 20 years after reform, between 1996 and 2002 alone, the Gini coefficient increased from 35.7 to 42.59. But since then, non-uniformity of income earned has been more or less constant, a result similar to that in Li and Sicular (2014), who find that inequality peaked before 2008 and then stabilized. And this is roughly consistent with the evidence on transition in class self-identification in Table 1: the transition from the first to the second WVS survey period is marked by a large decline in the number of people in China who say they belong to the upper middle class, and the next transition is marked by another large drop in the number who say they belong to the lower middle class, with almost all of these drops accompanied by increases in self-characterization as working or lower class.…”

“…Almost certainly not. Li and Sicular (2014) note that between 2002 and 2007, the incomes of the bottom and second lowest income quintiles in China increased by 46.35 and 56.76 %, respectively, although even these figures are less than the percentage growth for the top (94.27 %) and second (94.55 %) quintiles. Absolute poverty, measured by household income, has declined substantially as well.…”

Neoliberalism, Authoritarian Politics and Social Policy in China

“…According to World Bank estimates, China's Gini coefficient rose from 0.32 in 1990 to 0.43 in 2010 (https://data.worldbank.org). The World Bank's estimates are lower than most others, including the Chinese government's own, which indicate that the Gini coefficient peaked at 0.49 around 2008 before falling slightly in the last decade (see, for example, Li and Sicular, 2014). Gao et al (2019), based on survey data, see income inequalities continuing to rise significantly between 2007 and 2013.…”

Is China Socialist?

“…As China's explosive growth increased incomes in the cities, rural incomes grew as well, but at a substantially slower rate though [2008][2009]. In addition, entrepreneurship and diversification of income sources within urban and rural areas also increased overall inequality (Li and Sicular 2014;Zhou and Song 2016). The moderate decline in inequality since 2009 is almost certainly due to structural changes in China's labor markets.…”