The problem of the huge gap between the rich and poor in China and the solutions - Essay Example

In contrast to them the poorest 10 per cent of China’s population’s income increased by no more than 12-fold. This sustained trend ranging over a period of almost 2.5 decades has distanced the rich and the poor so much that they almost find themselves at opposite poles today. The Gini coefficient suggests that the yawning gap between the two populations in China has become so wide that it is now disturbing the limits of social stability. The hukou system in China The growing inequality between the rich and the poor in China is integrally linked with the hukou system of the permits of residency according to which the internal migration of the poor is restrained to the towns.

Economic gap between the rich and the poor in China has increased with the growing scarcity of the rural labor. The hukou system has limited the poor to the access of public services only where they are registered which are mostly the very places where they are born. “[M]aking individuals’ hukou status salient and public significantly reduces the performance of rural migrant students on an incentivized cognitive task by 10 percent, which leads to a significant leftward shift of their earnings distribution” (Afridi, Li, and Ren).

The rules applying limits to migration in China that limit the poor in the countryside are blatantly unfair. The concept of Guanxi The growth of business in general and the small and medium sized enterprises (SME) in China has recently grabbed the attention of the whole world. One factor that has played a prime role in the growth of business and the consequential strengthening of economy in China is the concept of Guanxi, that encourages people to build social connections and networks and seek benefits from them.

“The concept of Guanxi or a network of connections is a well known and central aspect of life in China, both in business and social life. It's no different from the 'old boys network' in the UK” (Walker). This system has not only increased the economic divide between the rich and the poor in China, but has also helped the cultivation of corruption and injustice in the systems. Chinese politicians today recognize and appreciate the Old Etonian bonds among the City Hall and the Downing Street.

China’s upcoming leaders are linked through families. Economist Mao Yushi has described the problem in these words, “The wealth in China is not only allocated by the market, but also by power. The people with power have money. The marriage between power and money allows people to make money by using illegal methods. It increases further the income gap between the rich and the poor beyond the market itself” (Yushi cited in Taylor). The system is unfair and the poor do not stand any chance even in the long run.

Solutions Decreasing disparity of income between the rich and the poor Since it is one of the most important contributing factors in the widening economic gap between people of