Economist: China’s income inequalities(转载)

Rich man, poor man

　　Sep 25th 2003 | BEIJING

　　From The Economist print edition

　　CHINA can be justly proud of having lifted some 400m people out of poverty in the last quarter of a century. But at the same time it has produced income inequalities that are among the fastest-growing in the world. These are not just the natural consequences of China’s impressive growth. They are symptomatic of barriers to labour mobility and other legacies of the old planned economy that could put a brake on the country’s development in the coming years. For China to reach its target of quadrupling 2000’s national product by 2020, it will need bold reforms in a wide range of areas. It is not clear that it has the stamina for them.

　　At the start of China’s move away from central planning in 1978, the average income of urban residents was about 2.5 times that of their rural counterparts. By the mid-1980s, the ratio had narrowed to 1.8, thanks to the breaking up of the people’s communes, and other policies aimed at boosting rural incomes. But since then, the countryside has fallen ever further behind. Rural enterprises began to sputter in the 1990s as a result of increasing competition from the cities, bad management and poor investment decisions. Income from farming stagnated. Now urban residents earn on average three times as much as those in the countryside.

　　The disparity may be worse than it seems. Some Chinese scholars believe that official figures overstate the disposable income of farmers, who have to buy seed and fertiliser and are subject to numerous illegal levies by local governments, and understate that of urban residents, who often have undeclared sources of income. Lin Tai, a social-sciences professor at Beijing’s Tsinghua University, has estimated that the urban/rural income ratio is as high as six. A similarly sharp divergence has occurred between the wealthy coastal provinces and the backward interior.

　　The widening income gap is often described by Chinese officials as a threat to social stability. “A Study of Mass Incidents”, a book circulated last year within China’s police force, said that large-scale public disturbances were increasing annually, particularly in the countryside. One of the reasons the study gave for this was the growing gap between rich and poor. But such incidents have had little perceptible impact on China’s overall social and political stability. A bigger potential threat is likely to come from the impact on China’s economic growth of the factors that have caused China’s urban/rural divide to expand at such a pace.

　　Thanks to what was until recent years a rigid system barring rural dwellers from moving into the cities, China’s rural population is unusually large for a country at its stage of development. About two-thirds of the population of 1.3 billion lives in the countryside or in rural townships. Of these, more than 300m have little or nothing to do. To increase returns on agriculture and boost incomes farmers’ tiny plots of land need to be merged and surplus labour moved into urban manufacturing.

　　China has gradually relaxed restrictions on mobility to meet demand for unskilled labour in the cities. But indirect obstacles remain. These include a lack of affordable housing, exclusion from urban welfare provisions, high fees for work and residence permits and the lack of any mechanism for selling or mortgaging land-use rights (the government formally owns all land) to provide the cash to move.

　　Removing these obstacles will take daring. Officials worry that in the absence of rural pension or unemployment benefits, allowing farmers to trade their land would deprive them of their only security—potentially creating a new source of social instability. Local governments fear that further encouraging the migration of rural labour would put excessive pressure on urban services.

　　China recognises the need for faster urbanisation. But fearing the development of sprawling shanty towns around big cities, it has focused on developing smaller towns. In a report published in July, a researcher from the Ministry of Labour and Social Security, Guo Yue, argued that by forgoing economies of scale, China’s urbanisation policy had led to a colossal waste of resources and had failed to boost growth or employment.

　　For cities to work better, they will need industries with increasingly skilled labour and higher technology to boost productivity. Yet China’s education system is woefully inadequate. Katarina Tomasevski, a UN official responsible for education rights, said in Beijing last week that Uganda was doing better than China in guaranteeing the right to education. She said China spends only 2% of its GDP on education (China says it is 3.4%, but the UN recommends 6%) and the government provides only 53% of school funding, lower than most other countries with compulsory education systems.

　　China will also need to overhaul its banking sector, so that capital can be deployed where it is needed instead of in unproductive state-owned enterprises or property speculation. This will involve liberalising interest rates and allowing greater private ownership of banks. But for years China’s leaders have dithered over these and other essential reforms, such as sorting out the banks’ huge portfolios of bad debt, fearful that a wrong move might precipitate an economic or social crisis.

　　In a critical report, the World Bank says it will take “enormous political will” for China to overcome resistance to needed reforms. Encouragingly, China supported the report’s publication. And next month the Communist Party is scheduled to hold a meeting of its Central Committee to discuss, among other things, speeding up reform—with due attention paid to stability. But don’t expect much to change.