China’s Income Gap Widens

3 Min
China’s Income Gap Widens

Beijing’s latest annual income data from the National Bureau of Statistics tell a tale of two Chinas, revealing an income gap that is the widest it has been since data collection began in 1985.

Two lives, briefly told, illustrate the divide.

Zhu Chengzhi makes 3,000 yuan a month, or just over $411, as a driver in Kunming, the capital of China’s Yunnan province. He told VOA Mandarin he pays no rent and spends less than 100 yuan a day, or about $14, on food. But with an annual income of about $4,930, he worries about the future.

“It would be fine if I only get a minor illness. But with serious illnesses, I might not be able to afford the medical expenses,” Zhu said. “But my situation is already better compared to many people.”

Lin Wen’s husband owns a company with 2,000 employees in Xinjiang. After asking to use a pseudonym to avoid attracting official attention, she told VOA Mandarin the company has assets worth billions of yuan, or millions of dollars.

She described her life as “simple.” She rarely eats expensive meals unless she needs to socialize. She goes to the gym when she can and travels to foreign countries two or three times a year. She avoids buying luxury goods to avoid calling attention to her wealth.

Party pushes for ‘common prosperity’

The disparity counters the Chinese Communist Party notion of “common prosperity,” a slogan coined in the earliest days of Mao Zedong’s leadership and repeated today by the current president, Xi Jinping.

Xi began pushing for common prosperity in 2013 when state-owned television and radio stations opted out of airing advertisements for luxury goods. In 2021, the social media platform Douyin, the Chinese version of TikTok, deleted more than 2,800 videos involving “showing off wealth” and closed nearly 4,000 accounts.

Xi promised a reduction in income inequality at the 10th meeting of the Central Financial and Economic Committee in August 2021, when he proposed a timetable for “Common Prosperity in the New Era of Socialism with Chinese Characteristics.” By the end of the 14th Five-Year Plan in 2025, he said, “gaps between individual incomes and actual consumption levels will gradually narrow.”

But, instead, they have widened.

1% control more than 31%

According to the National Bureau of Statistics, which started tracking such figures in 1985, the top 20% earned 5.3 times more than the bottom 20% in 2015. That was close to the average among developed, capitalist countries.

In 2022, according to the National Bureau of Statistics report, the average income of the richest 20% of urban households had widened to 6.3 times that of the poorest 20% of households.

The discrepancy in rural areas is even more extreme, the report shows, with the income gap last year between the richest and poorest as high as 9.2 times. The average annual income for the workers in the richest cohort was 46,075 yuan, or $6,316, while those in the poorest group earned 5,025 yuan, or $689.

A report from UBS Group, a global wealth management group, and its subsidiary Credit Suisse AG, referenced by Nikkei Asia, shows that the richest 1% of China’s population currently controls more than 31% of the country’s “‘household wealth.”

The Japanese financial news outlet said, “Some believe that China’s excessive debt problem is contributing to the widening income gap. They say that wealthy individuals and companies with large financial assets are benefiting from interest payments from some troubled financial institutions that should already have been wound down.”

It also said the government was “paying lip service” to the issue of poverty “but not delivering on the reality.”

Nikkei Asia reported that in the past three years, under Xi’s zero-COVID policy, employees in the service industries, such as catering, tourism and entertainment, lost their jobs or had their salaries reduced.

That contributed to the youth unemployment rate reaching a record high of 21.3% in June, according to the National Bureau of Statistics of China. Beijing stopped publishing youth unemployment rates on August 15 after the rate hit a new high.

The Nikkei Asia report added, “If income disparities worsen, the Communist Party will be blamed,” a possibility that party leaders and government officials appear to recognize.

Flying business class discouraged

Apparently worried about appearances, the state-owned investment bank China International Capital Corporation issued an internal notice to its employees last year asking them not to fly in business class.

There is also a gap between annual salaries paid by Chinese state-owned enterprises and the private sector, according to data released by the National Bureau of Statistics.

Gong Shengli, the author in Guangdong province of several books on China’s economy, told VOA Mandarin that employees of China’s state-owned enterprises have guaranteed incomes that remain constant as the economy rises and falls, unlike those who work in the private sector in small and medium-sized private enterprises. Their lack of a consistently predictable paycheck has contributed to the widening pay gap, according to Gong.

—-by Lin Ganfeng in VoA, Sept 20, 2023