China’s richest 20% earn more than 10 times the poorest 20%, according to a Bloomberg estimate. It’s a wider gap than in the US or European countries such as Germany and France, and one that hasn’t budged since 2015.
President Xi Jinping has now renewed calls for China to achieve “common prosperity”, seeking to narrow a yawning wealth gap that might threaten the country’s social order and economic ascent.
China’s overall development strategy has for long focused on cities. A city-oriented strategy has led to public services concentrated in urban areas, hurt the economy in rural areas and the income growth of residents there.
China is among the 20% most unequal countries in the world. Urban residents now roughly earn 2.5 times that of rural residents.
China’s income gap has expanded since the 1980s to reach a peak in 2008, when the Gini coefficient reached around 0.5; it’s now at a high level of around 0.47, according to an official estimate.
The actual income gap could be larger, because the estimate is based on household surveys, which tend to under-represent high-income respondents.
At the other end of the spectrum, rapid economic growth and market-based reforms have created tremendous wealth. China has 81 billionaires on Bloomberg’s ranking of the world’s 500 richest people, more than any other country after the US.
In a wider sense, China’s enduring pursuit of a more egalitarian society is not a new theme at all.
“Common prosperity” was first mentioned in the 1950s by Mao Zedong, founding leader of what was then an impoverished country. It was repeated in the 1980s by Deng Xiaoping, who modernised an economy devastated by the Cultural Revolution.
Xi made it a central part of his 2017 speech at the party congress to mark the start of his second term. This year, he has signalled a heightened commitment to delivering common prosperity, emphasising it is not just an economic objective but core to the party’s governing foundation.
China’s tech-heavy league of billionaires, already reeling from an all-inclusive crackdown by the regulators, is rallying behind the slogan with open wallets.
Tencent Holdings has earmarked about $15bn for social responsibility programmes, and Alibaba pledged $15.5bn.
Pinduoduo set aside $1.5bn in future profits for agricultural investments.
Seven billionaires directed a combined $5bn to charity in the first eight months of 2021, a sum that exceeds all giving nationally the year before.
Still more is coming from the private sector.
China has announced a sweeping overhaul of the $100bn for-profit education industry. It’s also launched a reform plan for healthcare costs in public hospitals designed to keep prices from rising too quickly, having already tackled excessive charges for drugs and medical supplies.
Longer term, the common prosperity goal may speed China’s economic rebalancing towards consumption-driven growth to reduce reliance on exports and investment, but policies could prove damaging to growth led by the private sector, say analysts.
Amid forecasts that suggest China could become the world’s biggest economy as soon as 2031, Chinese leaders are likely to tread cautiously so as not to derail a private sector that has been a vital engine of growth and jobs.