Is China becoming a more equal society?

The presence of technology in rural China is evidence that it is not just the booming cities that are the sources of growth. Furthermore, it suggests that inequality which has been symbolised by the ‘country versus city’ divide is now starting to decline.

Since the 1980’s China has gone through massive growth but it hasn’t been evenly shared. Income inequality is traditionally measured by using the Gini coefficient.

The Gini Coefficient is derived from the same information used to create a Lorenz Curve. The co-efficient indicates the gap between two percentages: the percentage of population, and the percentage of income received by each percentage of the population. In order to calculate this you divide the area between the Lorenz Curve and the 45° line by the total area below the 45° line eg.
Area between the Lorenz Curve and the 45° line  ÷  Total area below the 45° line

The resulting number ranges between:Lorenz 2

0 = perfect equality where say, 1% of the population = 1% of income, and

100 = maximum inequality where all the income of the economy is acquired by a single recipient.

* The straight line (45° line) shows absolute equality of income. That is, 10% of the households earn 10% of income, 50% of households earn 50% of income.

In 2010 China’s Gini coefficient was 61 which was one of the world’s most unequal countries however officially it has been falling for seven years from 49 in 2008 to 046 in 2015. Rural incomes have grown more quickly that their urban counterparts – in 2009 the average urban income was 3.3 times that of a rural worker but now it is 2.7 times. Many of those living in rural areas actually work in cities but are prevented from living there because of the strict residency system. Also companies have now been looking to the rural areas for cheap labour. However, in 2019 China’s official Gini is 46.5 (see graph), meaning that the expected gap will be 93% (ie, twice the Gini) of China’s average disposable income. Since average disposable income was 30,733 yuan ($4,449) in 2019, the expected gap would be about $4,138.

Source: The Economist – 2nd October 2021. Just how Dickensian is China? Inequality is betterthan it was. But it doesn’t feel that way

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