China´s Wealth Gap

Published on Author Juan

A study shows that China has one of the largest gaps between rich and poor in the world:
The dilemma for Beijing’s new leaders is to try to make Chinese consumers, not exporters, the key driver of China’s economy. Why? China’s rich are already spending what they need, and pocketing most of the rest.
The low savings rate of most Chinese households surveyed suggest they simply don’t have the money to spend. To move toward a consumer-based economy, therefore, raising the income, and spending, levels for the poor is key.The data suggests China’s rich are already spending what they need, and pocketing most of the rest.Here the next generation of Chinese leadership can and should play a significant role. An effective approach to reduce the inequality and to boost consumption, however, is to shift government spending priorities away from massive infrastructure development: roads, railroads and airports; and toward social welfare investment and income transfer programs.


2 Responses to China´s Wealth Gap

  1. Read the chapter in B&R on inequality! – yes, some is due to wealth at the upper end. But there is also a large rural-urban divide (hence migration) and large regional divides. The inequality numbers will remain high as long as there are large numbers of poor farmers in areas that, because they are far from boom regions, are themselves poor. From that perspective, infrastructure is crucial: as long as large swaths remain remote, they will remain poor. Plus construction itself adds to local incomes.

  2. I think the key is to distribute resources in a more balanced way. The government has spent very generously in order to build big cities like Beijing, Shanghai and Guangzhou. While those cities are great achievements, now is the time for leaders to look for balanced development between urban and rural and between east and west. Putting more infrastructure in rural areas and increasing social welfare in less developed area to attract people are some ways to start.