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Rising Inequality in China and the Move to a Balanced Economy
Author(s) -
Zhu Cuiping,
Wan Guanghua
Publication year - 2012
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2012.01274.x
Subject(s) - inequality , economics , economic inequality , globalization , urbanization , china , development economics , economic system , economic growth , market economy , political science , mathematical analysis , mathematics , law
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.