China’s ‘above warning level’ income gap shows inequality

By Chen Yang Source:Global Times Published: 2013-1-19 0:43:01

China's income gap has narrowed since peaking in 2008 but still lingers above the internationally recognized warning level, data from the National Bureau of Statistics (NBS) showed Friday.

For the first time in 12 years, China published its official Gini coefficient, a gauge of the wealth gap, calculated between 2003 and 2012. It showed the income gap reached a decade-high of 0.491 in 2008, before declining gradually year-on-year to 0.474 in 2012, according to the NBS.

The last time the NBS published a Gini coefficient was in 2000, which was 0.412. China's Gini coefficients in the past decade were all above the warning level of 0.4 set by the UN.

A Gini index between 0.3 and 0.4 signals a relatively reasonable income gap, according to UN standards.

"China's Gini coefficient gradually dropped after the global financial crisis in 2008, as the government took effective measures to bring benefits for its people," Ma Jiantang, director of the NBS, told a press conference in Beijing on Friday.

But the Gini coefficient has stayed at a relatively high level of between 0.47 and 0.49 during the past decade, indicating the urgency for policymakers to accelerate income distribution reform to narrow the gap between rich and poor, Ma said.

Compared to other developing countries, China's Gini index is close to that in Argentina and Mexico, lower than Brazil but higher than India and Russia, according to data provided by the NBS.

The publication of the official Gini coefficient has raised some suspicions, as previous research from private or foreign institutions showed that China's wealth inequality is more serious.

"The official Gini coefficient is less credible than a fairy tale," Xu Xiaonian, a professor with China Europe International Business School, said on his Sina Weibo account Friday. 

"It shows progress that government agencies have released their own calculation of the Gini coefficient, but we hope the NBS can publish more information, such as the original data and methodology," Gan Li, a professor with the Chengdu-based Southwestern University of Finance and Economics, told the Global Times Friday.

According to Gan's research published last month, China's Gini coefficient reached 0.61 in 2010, far higher than the NBS' calculation of 0.481 for the year.

"Gini coefficient data released by grass-roots institutions, as long as they are conducted by rigorous research, is an important addition to the official data," Ma said.

Data from the NBS also showed China's GDP growth slowed to 7.8 percent year-on-year in 2012, down from 9.3 percent in 2011 and marking the slowest pace since 1999. But it was within market expectations and also above the central government's target of 7.5 percent for 2012.

GDP growth momentum notably accelerated to 7.9 percent in the fourth quarter of 2012, supported by improvement in external trade and faster fixed-assets investment, Chris Leung, senior economist at DBS Bank (China), said in an e-mail to the Global Times on Friday.

Leung expects that China's economy will rebound in 2013, as the country's strategy to accelerate urbanization calls for more infrastructure investment. Better consumer sentiment will further boost domestic consumption, he noted.

China aims to double the country's 2010 GDP and per capita income for both urban and rural residents by 2020, but Ma noted these targets don't go far enough.

"The country should better manage income distribution and strive to make the earnings of low- and middle-income residents grow faster," Ma said.

"The central government can address income inequality by increasing fiscal transfers to low-income groups, such as allocating every year's newly added fiscal income and State-owned enterprises' post-tax profits to the low-income earners," Gan said.


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