Sharing Rising Incomes: Disparities in China

Abstract

This report discusses the challenge of extending the benefits of growth to all members of Chinese society. Government policies, or their absence, are heightening inequalities when social policies favor urban areas and economic policies favor the coast. Access to education, health care, and employment opportunities remains unequal. And gender disparities in the marketplace may be more pronounced. Chapter 1 documents national trends of growing inequality, and discusses rural income growth and the divergence between per capita GDP growth and personal income growth. Chapter 2 examines the widening gulf between rural and urban incomes, and notes that regional disparities are responsible for a small but growing portion of inequality. First, the interior lags behind the coast in human capital development. Second, per capita investment levels on the coast are two and a half times those in the interior. Third, natural advantages like harbors, transport corridors, proximity to world markets, and communication links have played a big role in spurring growth in coastal areas. Fourth, regional policies have favored coastal areas by designating them for preferential treatment in foreign trade and investment, and for piloting reform experiments. Finally, fiscal system decentralization has fueled disparities by emphasizing cost recovery for social services, and enabling richer provinces to spend more than poorer ones -further boosting the former's growth prospects. Chapter 3 explores how unemployment, education, land, and gender are affecting inequality in China. Chapter 4 shows how policies can harness growth to improve the welfare of the poor and curb damaging increases in inequality. The annexes explore the effects of internal migration on inequality and survey the literature , and survey the literature on inequality, income distribution, and migration in China.

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