The Global Economy. Case Study on China : Distribution of Income & Wealth

China
The source for global inequality data. Open access, high quality wealth and income inequality data developed by an international academic consortium.

China’s economic miracle has long been hailed as one of the biggest contributors to the fall in the global rate of extreme poverty. But now that growth is slowing and the country is working its way out of the “middle income trap,” economists have turned their focus toward the sharp inequality that latched onto China’s stunning growth. According to a new study, it’s far worse than previously estimated.

In recent years, the Chinese economy has become a major driver of global growth and a shaper of global markets including the USD, U.S. treasuries and global equities. What has been less studied, though, is how the fabric of Chinese society has evolved over the last five decades and the secular impact of globalization and technology innovation on China and the world economy.

China has experienced remarkable economic growth for the past 3 decades. However, its income gap between the rich and the poor appears to have been widening as measured by the Gini coefficient. The increasing income inequality is particularly an important concern for China, which had been a fairly egalitarian society prior to its economic reform in 1978. F

The ideas of wealth and poverty evoke radically different economic and existential conditions. But what do wealth and poverty have in common? They describe individuals as both economic and political beings, and are often used to explain individuals’ grievances or, at least in China, to inscribe their existence in the developmental trajectory of the country or in the building of the nation. The terms depict seemingly objective states of being, but comprehension of these expressions is largely dependent upon relative subjective perceptions. The conditions of being poor and of being rich are also both deviations from an assumed normality or ideal—the perfect situation of collective relative wealth and freedom from want which is the shared goal of every modern nation and every legitimate government.

When incomes and living standards rise, households tend towards having fewer
children, inducing a fall in the population growth rate. This is a pattern evident in the historical development of many countries once they have progressed beyond the Malthusian poverty trap (Day and Dowrick 2004). The resulting transition produces population ageing—a process whereby the proportion of old people within the total population increases (ILO 2009).

This paper presents the International Wealth Index (IWI), the first comparable asset based index of household's material well-being, or economic status, that can be used for all low and middle income countries. IWI is similar to the widely used wealth indices included in the Demographic and Health Surveys and UNICEF MICS surveys, but adds the property of comparability across place and time. IWI is based on data from 2.1 million households in 97 developing countries. With IWI we provide a stable and understandable yardstick for evaluating and comparing the situation of households, social groups and societies among all regions of the developing world. A household's ranking on IWI indicates to what extent the household possesses a basic set of assets, valued highly by people across the globe. IWI is tested thoroughly and turns out to be a stable index that hardly depends on the inclusion of specific items or on data for specific regions or time periods. National IWI values are highly correlated with human development, life expectancy, and national income, and IWI-based poverty measures with poverty headcount ratios.