This work is part of the project entitled “Urbanization with efficiency and equity in China” funded by the National Natural Science Foundation of China through grant 71133004. Yunnan provincial government provided support through its “100 Top Scientists Program” (Bairen Jihua).
Rising Inequality in China and the Move to a Balanced Economy
Article first published online: 28 FEB 2012
© 2012 The Authors China & World Economy © 2012 Institute of World Economics and Politics, Chinese Academy of Social Sciences
China & World Economy
Special Issue: Rebalancing of China's Growth
Volume 20, Issue 1, pages 83–104, January-February 2012
How to Cite
Zhu, C. and Wan, G. (2012), Rising Inequality in China and the Move to a Balanced Economy. China & World Economy, 20: 83–104. doi: 10.1111/j.1749-124X.2012.01274.x
- Issue published online: 28 FEB 2012
- Article first published online: 28 FEB 2012
- development policy;
- Gini index;
- income inequality;
China faces serious external (i.e. trade) and internal (i.e. structural) imbalances. Both are related to income inequality, reduction of which will help to increase domestic demand. This paper discusses how income inequality has evolved over time. This is followed by an exploration of the consequences of high inequality. Driving forces underlying the rising inequality are analyzed before providing concrete policy recommendations. It is found that inequality declined in the early period of reform, until the mid to late 1980s, and then began a rising trend up to 2010. Major determinants of inequality include: location, institutional and policy factors, trade and globalization, and education inequality and human capital gaps along rural–urban and spatial divisions. To achieve a balanced economy and a harmonious society, development policies in China must shift from emphasizing growth to prioritizing equality. In addition, government interventions can target rural–urban disparity through rapid urbanization, and tackle regional inequality by developing financial markets, ensuring progressive allocation of fiscal resources, promoting trade and foreign direct investment in inland China, creating more formal jobs and supporting the service sector.