The Widening Gap Between Rich and Poor in China - Essay Example

Student’s Name: Course Code: Lecture’s Name: Date of presentation The Widening Gар Bеtwееn Riсh and Рооr in China Despite the impressive economic growth, poverty is still a notable and conspicuous feature of the Chinese society. The many years of economic growth in china has produced a large population of rich people; however a study conducted in the late 90s reveals a rather shocking fact that alongside the wealthy population, there is a considerable size of populations suffering from absolute poverty. This includes a sizeable marginalized urban population for instance the low income earners, rural- to- urban migrants, laid off and unemployed urban workers and rural peasant farmers. The economic conditions under which this disadvantaged groups live in sharply contrast the up market conditions and life the booming middle class live (Jisheng, 2006). The rapid economic growth of China economy began in the late 40s after the Communist revolution. Many agree that the momentum led to the vast wealth created over the second half of the 20th century. However during the same period, inadequate attention was given to the general welfare of the highly expanding population leading to the growth of the large income gap between the rural poor and the urban rich. A (Cheng Fang & Xiaobo, 2006) According to (Yumei, 2010), with growth and development of the china’s economy, the gap between the poor and rich is widening day by day. (Cheng Fang & Xiaobo, 2006), notes that the urban poverty in china declined in the years between 1992 and 1995, but grow rapidly over the period between 1996 and 1998, as a result of major urban reforms introduced during the period. The author also reveals that the highest concentration of urban poverty and hence the highest gap was recorded in the western China region and the relative income gap between this western region and the rest of china continued to grow (Cheng Fang & Xiaobo, 2006). (Mahtaney, 2010) assert that although much of the poverty has been confined in the rural countryside of China, recent observations gives a conflicting picture due to the deterioration of the income distribution in cities and towns as a result of the drastic urban reforms introduced in the mid-1990s. In pursuit of industrial development, China government introduced a rationing system in 1950s aimed at creating a stable urban population for its industrial needs. Through this program, the urban residents within the working age were all offered job opportunities in the industries that were mushrooming in all cities and town. The jobs were not only permanent but came with lucrative benefits to the employed such as subsidized or free housing and healthcare. The rationing programs were introduced also to ensure equal access of food and other resources at subsidized rates. This created a more balanced income to the urban population than in the rural population. Also due to the welfare schemes associated with the urban jobs, the livelihoods of majority people were intertwined with the fate that befell state corporations and sectors (Chow G. , 2006). Data showing how the gap between the rich and poor has been growing postulate that;in China’s GDP attained 43.05 trillion RMB in the year 2009, up from 0.36 trillion in 1978, moving the third largest global economy. This historically represents a record rare growth rate occurrence of 9.8%. Although the growth rate slowed down in 2008, it was still above 9%. The grim picture is that the average income of the top 20% the China income over this period was 10 times more than that of the low 20%. The gap between the rich and poor is two sided. On one sided, the growth of the rich club contributed positively to the economy, through the increase of the capital savings ejected as investment into the economy. The higher the capital savings invested the greater the greater the growth rate of economy: this is based on the concept of diminishing marginal consumption. On the contrary, the growth of the economic gap between the rich and the poor causes social distress and economic inhibition. Again based on the concept of diminishing marginal consumption, the consumption ratio of the poor is increased while that of the rich decreases, leading to an inadequate overall consumption demands. Socially the gap leads to serious consequences such as stress and anxiety (Yumei, 2010). Economic researchers have fronted a number of opinions on the effect of the wealth gap between the rich and the poor within the China’s economy. For instance according to Liping Sun, the inadequacy of the consumption demand is more significant than the rise in investment. Bringing together time series data, section data and static and dynamic analysis method, Liu Ying concludes the positive correlation between economic growth based of GDP and GINI coefficients and the income distribution. Shujian Xiang on the other hand finds out that the rate of unemployment is more common within the four variables of unemployment, i.e. social relief and financial pension expenditure, industrial value added on GDP, mean wage growth and GINI coefficient based on multiple regression models. From the above, he deduces that regardless of whether income distribution is even or not there is negligible impact on economic growth (Chow G. , 2006). According to the current scenario of economic development in China, the growing gap between the rich and poor impacts the economic growth dominated by the general promoting effect. Since China has for a long time been a socialist nation; therefore the impact of the accumulation of capital and capital investment on the development of economy is well known. For instance the total capital by expenditure of GDP is above 45%. Although most of the scholars believe that supporting the capital influence is no longer popular as it was in the 1990s, the negative impact of the inadequate domestic demand is not in comparison with the positive effect as a result of capital (Mahtaney, 2010). There are a number of reasons that have been attributed to the rise in poverty levels among the rural population. Firstly the national has for the years been unfavorably treating the rural residents when compared with the urban population. This is manifested by the inadequate monies spent by the central government on infrastructure within the rural countryside. The successive governments have been contributing meager resources to improve agriculture which is the mainstay of the rural population. Unlike in the urban areas, the rural population has been enjoying little or no welfare benefits such as free education and subsidized healthcare. Although government policies have enhanced labour mobility thus permitting the farmers to migrate to the urban regions, those already working in these cities and towns have been experiencing discrimination under the policies set out by the central government which were established in 1950s and which make the urban immigrates fail to get residence in the urban areas thus denying them the entitlement of the welfare benefits such as education and healthcare. Although communism economist system was abolished, the central government still procures farm products to the private traders thus making the economy not to automatically determine the pricing and distribution of the produce for the benefit of the farmers. This neglect to the concerns and development issues of the rural population emanates from the historical economic reforms for development. Inn China majority of the population live in rural areas and consequently do not enjoy the fringe benefits associated with the urban residents. More so, within the urban cities, economic inequality was disguised by the fact that most of the urban dwellers are poor. This situation was complicated by the delimits associated with the central planning policy carried out by the China central government; leading to low efficiency, insufficient information and reduced productivity as a result of state ownership, due to the excessive centralized social, economic and political control. Due to the limited resources available at disposal for the central government, favoritismswere readily cultivated by the queuing systems used by the urban dwellers in receiving the welfare funds. Although, education opportunity was readily available and free to all, the state controlled it was the prerogative of the state to decide which kind of jobs the graduates would engage in based on market demand. This made people with similar qualifications to go differently in terms of career development. The need to deal with more vital reform concerns within the state enterprises, the financial and banking systems, and the open door policy coupled with both financial and human resources aimed at accomplishing the resources of building the infrastructure for the special economic need areas. The problem and challenge is now popularly referred to as three- farm (san- nong) problem which covers rural, farming and farmers (Song, 2004). The key component of the three- farm challenge is the fact that the farmers’ rights have been largely violated by the illegal trading activities by the local government agencies and staff. This concept does not refer to poverty as the lack of income per se but it seeks to explain the economic welfare of low income earners within rural China. For instance the confiscating of land through forceful means to pave way to urban development, also in situations where compensation is carried out, the farmers receives little compensation that is well below the market price. In rural China, most of the farmers and other rural dwellers are often not paid, for their services or for the time that public work such as teaching. This is on top of the illegal fees and levies that they are compelled to remit to the central government. Some of these abnormal taxes include special levies for growing commercial crops other than grains, fees for schools and road construction,> the rural farmers are also subjected to tax on the reported acreage of the personal land over the actual acreage used. The China government imposed an additional tax levy which increased the government revenue paid to the central government (from 22 percent in 1993 to 55% in 2004). This tax levy was introduced at the expenseof both local and provincial government. All through the rule of PRC, the localgovernment and official have been exercising authority over the farmers. This abuse of power by the law protectors was more serious since the officials were given power also to be in control of the activities occurring in the farms leading to violation of the human rights of the farmers (Chow G. C., 2006) In China despite the increased efforts on combating rural poverty, social policies established in 1980s and 1990s were majorly urban- centric and depended much on the amount contributed by the employers. These policies facilitated the enhanced urban industrialization and thus rapid growth in urban areas. The resultant economic reforms and the improved economic efficiency lifted a large proportion of the urban population from the absolute poverty line. However, as the economic continued to expand, it became apparent that the pro- development was not improving the economic status of the lowest income earners (Qiang, 2007). These economic policies improved and reinforced the financial prowess and wellbeing of the already rich population rather than eliminating poverty the underprivileged at the same rate. The amalgamation of both social policy and economic strategy during this period had a number of equality and poverty implications (Gregory, 2002). There were notable impressive long term results of the rapid long- term growth. However, the growth has not occurred without much problem. Data about poverty in rural countryside has shown a gradual rise in poverty index in the rural areas. Since the later years of 1990s, economic inequality and poverty in China began to show some distinctive features. For instance, the birth of a new group of “new poor”group within the urban areas- individuals who have never improved their living standard at all even after the introduction of economic reforms in 1980s and 90s (Song, 2004). There are however some traditional group of poor people consisting of the elderly who lack the support of the relatives and community members, the disabled and the sick. There are also people who have been traditionally poor within the society. The new poor group became conspicuous in the late 1990s. According to these are the individuals who have lost their businesses and jobs, or could not gather adequate means of supporting their families. Also there is a group of farmers who left their farms and came to town to urban areas to seek jobs within the industries. Majority of the bunch lived close to the poverty line. For instance the urban unemployment rate changed from 0.1% in 1980 to 4.3% in 2003. However, it approximated that the percentage index can be as high as 10% if the unregistered unemployment (Jisheng, 2006). Income equality between the urban poor and urban rich has been increased remarkably. For instance the Urban GINI Coefficient for the disposable income was above 0.30 in 1998. The gap between different areas is still very wide. According to General Survey Team of Rural Regions of China National Statistics Bureau; about 29 million people in western rural China, representing 50.6% of the total China population (Chow G. , 2006). Conclusion Althoughpoverty in Chinas is mostly within the rural countryside, there has been a growing concern about the deteriorating income distribution pattern in the cities in the wake of the ambitious urban reforms of the 1990s and the subsequent economic stabilization of the 21st Century. References Cheng Fang, & Xiaobo, X. (2006). Emergence of urban poverty and inequality in China:evidence from household survey. Center for Agricultural and Rural Development (CARD), Iowa State University, Ames, IA, USA . Chow, G. C. (2006). Rural Poverty in China: Problem and Policy . Princeton University . Chow, G. (2006). Corruption and China’s Economic Reform in the Early 21st Century. Journal of International Business. Gregory, C. (2002). China’s Economic Transformation. Oxford: Blackwell Publishing Company. Haigang, W. (2007). Analysis on Chinese Residents' Income Distribution and Fluidity. Zhongshan University Press. Jisheng, Y. (2006). Analysis on Social Stratification in Contemporary Chinese Society. Gansu People's Press. Mahtaney, P. (2010). India, China and globalisation: Emerging superpowers and the future of economic development. Singapore: Palgrave/Institute of Southeast Asian Studies. (1st ed ed.). P., Palgrave. Qiang, Y. (2007). The Fair Distribution of Chinese Personal Income. Social Sciences Academic Press. Song, Z. Y. (2004). Xin Nong Lun (New Farm Treatise). Xin Hua Publishing. Yumei, G. (2010). The Influence of Wealth Gap on China’ s Economic Growth. Economics and Mathematics Program, Renmin University of China . Read More