Week 7: Inequality in China Flashcards
What did the pope tweet in 2014 about inequality?
“Inequality is the root of all evil”
What does Hirschman (1973) explain about the tolerance of inequality?
-At early stages of development, tolerance for rising inequality is high as people hope disparity will fall in the future
-However, eventually there will be a point where it isn’t endured
How was pre-reform China percieved?
As an egalitarian society despite a significant rural-urban gap
What is an egalitarian society?
A society that emphasises social, political and economic equality
When did inequality begin to rise in China?
Mid-1980s
Why did inequality rise in the 1980s
-Govt focused on urban sector
-Faster urban growth widened rural-urban gap
-Urban growth depended on investment and fixed assets which isn’t divisible
How did the open-door strategy raise regional inequality?
Preferential policies biased towards coastal regions.
Trade and FDI increased in these regions
What statistics does Wan and Sebastian (2011) give regarding inequality?
In 2008, 100 million Chinese lived of no more than $1.25 a day
In 2010, China had 960,000 millionaires
How has inequality impacted domestic demand?
-Dampened domestic consumption
-Greater pressure on exports and trade imbalance
How has inequality affected social cohesion?
-Undermined social cohesion and political stability
-Crime increases (Tian et al. (2009))
-Civil unrest
How has inequality affected growth/poverty?
-Rising inequality offsets the poverty reducing impact of growth
-The benefits of growth only accrue to the rich in a highly unequal society
-Redistribution is arguable more important than growth in combating poverty
What does Wan et al. (2006) argue?
-Rising inequality hinders economic growth
-Higher inequality leads to pressure for redistribution and can reduce growth as it required additional transactional costs
What 3 initiatives has china developed to combat inequality?
- Great Western Development Fund (aims to reduce regional differences)
- The Socialist New Countryside Development (aims to reduce rural-urban gap)
- 11th Five-Year Plan (aims to build a harmonious society?
What interventions has China recently done to reduce inequality?
-Expansion of social protection to the rural population
-Improvement in living conditions for workers
-Increase in public funding for education and health
What areas did the CCP identify to reform to improve income distribution?
-Household registration system
-Social protection
-Access to public services
-Tax
-Governance
What does Knight et al (2021) show about household wealth inequality?
Inequality of wealth increases as:
1. economic reforms occur
2. marketization occurs
3. capital accumulate
How does Knight et al (2021) explain why inequality rose so rapidly?
-Profits go to shareholders (overwhelmingly wealthy)
-40% of GDP is invested
-Rise in price of wealth assets
-Financial markets are only accessible to the wealthy
Who does Knight et al (2021) show are the winners?
Top 10%
Bottom 8% saw a fall in wealth per capita
How much did net household per capita rise between 2002 and 2013?
17% per annum
How much did the share of total wealth increase for the top decile?
From 37% to 48%
What policies could reduce inequality?
-Reform banking system- increase opportunity to access funds
-Release more land for building houses
-Wealth/inheritance tax
-Reduce corruption
What % of China’s minorities live in poor inland areas>
75%
What is the Hukou system?
Household registration system that classifies citizens as rural or urban- affecting their access the benefits/social services
What was the impact of the Hukou system?
Surplus labour could not move to cities as it was reinforced by grain rations
