Rising inequality in China

19 August 2014
Sid Zoichi

During the Chinese winter of 2010-11, I stayed in Changsha, capital of Hunan province, for a couple of months. All the problems of Chinese capitalist development were on full display.

The city is often referred to as “the capital of entertainment” due to its florescent media industry. Downtown Changsha is sleepless. Splendid neon lights shine from dusk till dawn. Shops, cinemas, restaurants and karaoke houses abound.

Walking these magnificent streets, you encounter a beggar or a homeless person every 10 metres. Three-year-old children grab the legs of passers-by for change, primary school-aged kids peddle flowers to couples, and old people in shabby clothes kneel on the cold pavement trembling. Beside them, rich people get out of their luxurious cars and step into the fancy clubs.

The scenes reminded me of the words of a famous poem by Du Fu of the Tang dynasty, which was written more than a thousand years ago: “Behind the vermilion gates meat and liquor go to waste, while out on the road lie the bones of those frozen to death.”

After three decades of uninterrupted high-speed economic growth, China’s inequality is only increasing.

To justify the embrace of market capitalism, Deng Xiaoping, the “chief architect of China’s reform and opening-up”, famously claimed in the 1990s: “We should allow some people and some regions to get rich first, then let the rich help the poor, so as to gradually achieve common prosperity.”

China’s Gini coefficient of wealth (a measure of inequality: 0 would represent perfect equality; 1 would indicate all wealth in the hands of one person) rose from 0.3 in 1980 to 0.55 in 2010, making Deng’s rhetoric a total joke.

Even the government-controlled Academy of Social Sciences admitted in a recent report that the top 1 percent of households own one-third of total assets in China. The bottom 25 percent of households own only 1 percent of all assets.

The non-government National Economic Research Institute believes that the gap is much larger than that, because the official figures do not calculate the so-called “grey income” of rich households, such as government officials’ wealth gained through corruption.

The case of Zhou Yongkang reveals only a tip of the iceberg of this hidden “grey income”. Zhou was formerly the head of China’s secret police and a member of the previous Central Committee Politburo Standing Committee (China’s top leadership usually consists of fewer than 10 members).

After internal power struggles in the ruling circles, he was abandoned by the Communist Party last year. Subsequently, a Hong Kong source exposed that the Chinese government had confiscated more than RMB100 billion (around $17.5 billion) in assets from Zhou and his close confidants.

Instead of helping the poor to “achieve common prosperity”, those who have been allowed to get rich first are more willing to give a big slice of cake to powerful party officials such as Zhou. In return, the officials implement economic policies that favour the bosses, ignore the appeals from the poor and direct the forces of state violence to repress the revolts of workers and peasants.

On 2 August, a grievous dust explosion occurred in a metal products factory in Kunshan, killing more than 70 workers. The company had refused to install de-dusting equipment – a refusal indulged by the government’s supervisory institutions.

Disgustingly, the local government has an advertising slogan that says, literally: “The people of Kunshan welcome your investments; the higher your exploitation rates are, the more delighted we shall be.” In this slogan lies the cause of China’s rising inequality.

Having grown up in the city, I have little first-hand knowledge of China’s rural areas. However, the poverty of the rural population is one of the most important factors contributing to inequality.

Research conducted by Wuhan University sociologist Liu Yanwu highlights a shocking picture of life for the rural poor. In some villages investigated by Liu’s team, more than 30 percent of the deaths of elderly people are the result of suicide. They do not want to become economic burdens on their children, who usually are migrant workers in the cities.

The recently established rural pension system provides only a pitiful monthly payment of RMB55 (less than $10). Once struck by serious illness, the elderly rural poor normally cannot afford medical treatment. Suffering from the illnesses and unwillingness to bother their struggling children make suicide seem the only solution in many cases.

Such devastating inequality inevitably breeds desperate resistance. That’s why there have been massive factory strikes of up to 50,000 workers, riot-like environmental protests lasting for days and battles between militarised police and villagers armed only with shovels.

Many of the poor in China have realised that neither the rich nor the government will help them to achieve common prosperity. Thus the only way to make their lives better is through collective struggle.

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