Causes Of Income Inequality In China

Rather than reducing social and economic inequality, China’s rapid economic growth magnifies the gap of benefits received by people in different socio-economic groups. As we will see, social and economic inequality are two sides of the same coin and is not solely the product of economic development. In addition to pure market forces, state policies play a significant role in contributing to the high levels of inequality China experiences nowadays. Despite the government’s concern towards inequality, recent interventions are not sufficiently targeted at the main causes of this issue which result in the continuing climb of China’s inequality figure. Nevertheless, contrary to conventional wisdom, the threat of inequality to China’s social and

These sources of inequality are inherent in China’s hukou system which restricts rural migrants from privileges enjoyed by urban residents in terms of social security such as retirement benefits, schooling, and housing (Joseph, 2014, p. 260-261). The addition to income from a university education compared to that of primary schooling has increased dramatically from 9% in 1988 to 39% in 1995 to 88% in 2002 (Gustafsson, Li and Sicular, 2008, p. 25). This means that levels of educational attainment highly influenced the income earning prospects and is a significant factor of income inequality in China. Indeed, gap in education contributes as much as 11% to China’s Gini coefficient (Gan 2013, p. 18). The exclusivity of access to education inherent in the hukou system therefore significantly contributes to the rising levels of inequality in

Contrary to the finding that “income inequality increases socio-political instability” (Alesina and Perotti, 1993, p. 18) current levels of inequality in China seems to have little impact on the societal status quo. Although China has experienced massive number of social protests, about 180,000 to 230,000 in 2010 alone (Gӧbel and Ong, 2012, p. 8), these protests are motivated by “abuses of power and other procedural justice issues, rather than being fueled by feelings of distributive injustice and anger at the rich” (Whyte, 2012, p. 6). According to a research paper funded by the European Union (Gӧbel and Ong, 2012, p. 36), income inequality is not among the top five motivations for social protests which include land disputes and environmental degradation. This data is evidently incompatible with a survey finding that income inequality is too great for 95% of Chinese as opposed to only 65% of Americans. Barring survey inaccuracy, high levels of inequality in China so far does not translate to dissatisfaction that leads to outright mass protests and instability. Thus, it seems that inequality alone is not in itself a threat to China’s social and political