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Eight Percent of China's Workers Earn 55 Percent of Income By Xie Wong

Eight Percent of China's Workers Earn 55 Percent of Income

By Xie Wong
Radio Free Asia
Jul 30, 2009

 Foraging for food. The latest research report indicates that China's per capita income gap is 55 fold, far beyond the official public figure. (Getty Images)
A recent study reveals China’s per capita income gap reaches 55-times the difference between the rich and the poor, a number far beyond the official figure. The researcher believes that both corruption as a consequence of the ill-conceived system and gray income of special groups of population contribute to this gap.

In a recent publication entitled, “Distribution of national income and gray income,” deputy director of National Economic Research Institute, China Reform Foundation, Wang Xiaolu concludes that the official average income figure is obviously distorted and lower than the actual figure due to all practical difficulties during the survey, especially the considerable amount of gray income obtained by the rich. Gray income includes income of illegal, non-disciplinary, questionable, and undisclosed sources.

The report is based on a 2005 to 2006 survey of income of more than 2,000 households in urban and rural China. The data revealed that in the year 2005 average disposable income for the top 10 percent with high income (a total of 19 million households and 50 million people in China) is 97,000 yuan (US$14,197) per person, three times higher than the official figure, 29,000 yuan (US$4,244). The national hidden income totals 4.4 trillion yuan (approximately US$644 billion), which is equivalent to 24 per cent of China’s GDP.

The study finds that the top 10 percent households hold the up to as high as 75 percent of total hidden income. The actual difference of per capita between the top 10 percent and the bottom 10 percent in urban areas is 31 fold instead of official figure of 9 fold. The difference in per capita combining both rural and urban is calculated to be 55 fold between the top 10 percent and the bottom 10 percent, rather than the 21 fold projected by the official statistics. The report also indicates that due to insufficient data, the Gini coefficient is hard to finalize now, but surely reaches the inequality warning standard, 0.45, used by the World Bank.

Cai Chung-Guo, an expert in Chinese labor issues, comments on the wide per capita income gap in China:

“The income gap in China is significant. It reflects several issues. One of them is the unreasonable economic structure, i.e., the incomplete market structure. The Chinese government monopolizes the banks, energy, and so forth, in the market and causes a deformity of the market. These industries earn more because the state protects and monopolizes them. There is no transparency.”

The report reveals that significant gray income exists in urban high income households. According to both partial and public information, the analysis suggests the following gray income sources.

First, serious management loopholes exist in governmental payment allocation channels. The majority of fundings suffer from low transparency and loss by misuse and abuse.

Second, financial corruption prevails.

Third, periodic payment-seeking by officials takes place by controlling government licensing and administrative approval fees.

Fourth, land expropriations promoted by developers has become the main gray income source for real estate and associated officials.

Fifth, the income of monopolized industries prevails. In 2005, there were a total of 8.83 million workers in electric, telecommunications, petroleum, finance, insurance, water, energy supply, tobacco, and so forth. They make up less than 8 per cent of the total workers in China, and earn total income of 1.07 trillion yuan, which is equivalent to 55 per cent of the total national workers’ income, and a total of 920 billion yuan more than the total of national average wage. The administrative monopoly has contributed substantially to this inequality.

Economist Cheng Xiaonong states that a certain gap exists in different industries and is expected.

“In any country, relatively high-tech industries pay more than the average and low-tech industries because of the difficulty, skill, professional training and requirements of the task. However, the variety of extra income far exceeds the actual income of governmental officials and the intentional omission of these sources during the survey conducted by the Bureau of Statistics is a concern.”

The report points out that in recent years the enlarged income gap has caused an increasingly apparent imbalance in China’s economic structure. While the economy grows rapidly, excessive savings and lagged domestic consumption growth occur. Domestic demand is relatively insufficient, and the economic growth is heavily dependent on investment and export. What’s becoming severe in this imbalance is the outcome of the economic growth is skewed towards a small group. This leads to serious injustice in income distribution and polarization in society. The study indicates that this is the main reason for the widespread dissatisfaction in society. As a result, it is the ultimate threat to building a harmonious society and developing the economy.