James Lewis

Liberalization and Wealth Inequality in China

Nice comment Tony...

I think one of the tenents of globalisation is that a larger global system contains a larger amount of nominal value (may it be money, resources etc). A further tenent would be that a larger global system may create substantial innovation and further expand productivity and wealth output. So as one country develops within the global system, there is not normally a shift in net wealth. Coca Cola shareholder nominal net value will increase as well as the Chinese distributor. Of course the shift occurs when the shift in the shareholder is grosly under that of the Chinese distributor.

This of course is what everyone is so annoyed at, as China's policies crowd out the benefit of developing the size of the global economy at the expense of other countries (USA from rich side, Pakistan/Thailand/Viet... from poor side.

On a more micro-level, there is a very serious crowding out on who is benefiting from China's rise on the local level. I do see the economic value and growth of the country as a fixed pie. The government, banks, powerful business people do in effect decide what chunk goes to who. After all it is the government who is keeping wages low to increase export competitiveness. This is a very direct policy and clearly concentrates wealth at the top.

I do not agree the middle class is slave to the corrupt communist oligarchy. It is the lower class and fast becoming the lower middle class. Which accounts for a huge % of the population. Rebellion here is where the issue is. Please also note the relationship between the ethnic minorities and the lower class and also the concentrations of lower class in the west of the country. There is a very clear definitive pattern. For now this can be mitigated.

It is if the lower-higher middle class divide widens substantially that there will be problems. After all these people are educated, know how to use computers, know how to organise themselves and know that they are not being given the same chances as the 'others'. To stop this from occuring, I hope the Chinese government will raise wages, build more low-cost homes, distribute wealth more evenly by reducing corruption. And start to form a proper anti-corruption bureau that does not answer directly to the government. A court system that is not run by the government.

Of course this will take time, but is China moving in the right direction?