Rising Inequality in China

doi:10.1017/CBO9781139035057.003

1 - Rising Inequality in China

Key Issues and Findings

Published online by Cambridge University Press: 05 July 2013

Li Shi ,

Hiroshi Sato and

Terry Sicular

Edited by

Shi Li ,

Hiroshi Sato and

Terry Sicular

Show author details

Li Shi: Affiliation:
Beijing Normal University
Hiroshi Sato: Affiliation:
Hitotsubashi University
Terry Sicular: Affiliation:
University of Western Ontario
Shi Li: Affiliation:
Beijing Normal University
Hiroshi Sato: Affiliation:
Hitotsubashi University, Tokyo
Terry Sicular: Affiliation:
University of Western Ontario

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Summary

Introduction

More than three decades have passed since China embarked on economic reform and began to transform its economy from a socialist planned economy to a market economy. During these decades China has experienced rapid growth in gross domestic product (GDP) and personal living standards. Growth, however, has been accompanied by widening income inequality. The rise in inequality has been documented in a wide range of studies by individual researchers, international organizations, and government agencies (Benjamin et al. 2008; Griffin and Zhao 1993; Gustafsson, Li, and Sicular 2008; Ravallion and Chen 2007; Riskin, Zhao, and Li 2001; World Bank 2009; Zhang 2010). The various studies give different estimates of the level of inequality, but the authors all agree that since the 1980s inequality in China has increased markedly.

In the context of China's reforms and ensuing rapid growth, it is not surprising that inequality has increased. Growth is often associated with early stages of economic takeoff, which usually begin in particular sectors and regions. As those leading sectors and regions pull ahead of others, income distribution becomes increasingly uneven. Transition from a socialist planned economy characterized by egalitarian wage and income distribution systems also generates inequality. Markets bring income variation arising from risk and uncertainty, and they differentiate among households and individuals based on productivity, human capital, effort, entrepreneurship, and wealth holdings. In a market system, such sources of inequality can play a positive role in providing incentives for innovation, risk taking, effort, and investment.

Type: Chapter
Information: Rising Inequality in China
Challenges to a Harmonious Society
, pp. 1 - 43

DOI: https://doi.org/10.1017/CBO9781139035057.003 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2013

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