China Rich-Poor Gap Is World's Worst

Richard Spencer, The Telegraph (UK) Report:

BEIJING -- After 50 years of Communism China now has the biggest divide between urban rich and rural poor in the world, according to the government's own researchers.

A report by the Chinese Academy of Social Sciences, one of the Communist Party's leading research schools, compared the country gloomily with Zimbabwe.

It said the earnings of urban residents were now more than three times those of residents of rural areas. If non-cash factors were taken into account - such as the fact that only urban residents receive health care and social security benefits - the difference could be six times.

"When comparing with other countries, Zimbabwe's income disparity may be slightly higher than that for China if we only considered nominal income," the report concluded. "But if non-currency factors are taken into consideration, China's rural-urban income gap is the highest in the world."

The report, and its publication in state media, is the latest sign of the government's concern that the country's rapid economic reforms have left most of its population behind, and may even become a threat to social stability.

It is torn between the knowledge that only continuing the current rates of growth - more than nine per cent last year - can cure poverty, and the fact that they still rest on former leader Deng Xiaoping's dictum "Let some get rich first".

In line with this, the booming cities on and near China's coast have had preferential investment treatment, their populations protected from socially dangerous mass migration to the cities by a strict resident permit system.

The survey found almost half the wealth gap in China was accounted for by the urban-rural divide. But there was also a growing gap within urban areas, between the ordinary working class and the new middle and super-rich classes.

The top five and 10 per cent of earners in China accounted for 19.8 per cent and 31.9 per cent of the country's revenue in 2002, the report found.

According to Li Shi, the economist who wrote the report, a programme of tax reduction for rural areas could alone increase farmers' incomes by five per cent.

The government should also cover educational, health and social security costs in the countryside, he said. The government is already attempting this, though critics say that they are unlikely to succeed unless they dramatically reduce the number and powers of local officials.

© Copyright of Telegraph Group Limited 2004.