As the rich get richer: China’s widening wealth gap is a major source of social unrest

The Standard (Hong Kong)

June 27, 2005
The darkest side of China’s miraculous economic takeoff is probably its ever-widening wealth gap, which has become a major source of social unrest.
The striations in Chinese society from 26 years of economic reform and opening up run in a remarkable number of different directions: between the eastern coastal and inland regions, between urban and rural residents, and between the differing levels of society itself. The rich are becoming richer and the poor poorer.
Life appears to have improved greatly across the social spectrum if one follows the numerous reports of how feverishly China’s citizens have spent, both at home and abroad, buying luxuries.
The luxury carmaker Bentley planned to sell just 10 units when it entered China in 2002. By the end of the year, it had sold 92. There are now more than 300 Bentley sedans on mainland roads, including the top model, which sells for 11.88 million yuan (HK$11.15 million).
Richemont, the Swiss luxury goods group, held a watch show in Beijing’s Forbidden City in September 2004 to promote such brands as Lange & Sohne, Baume & Mercier, Cartier, Dunhill, IWC, Mont Blanc, Paget and Vacheron Constantin. At the show, Richemont’s senior executive Franco Cologni said the group had three to five million mainland customers. Their purchases of Richemont’s luxury goods at home and abroad now account for 40 percent of the group’s global sales.
Early last year, German luxury eyeglasses maker Lotos opened a shop in Beijing confident that the potential for mainland sales is huge.
About 20 years ago, mainland students in Western countries were considered poor though hard-working. Today in New Zealand, Australia, Canada or Britain, many teenage Chinese pupils are known as little “big spenders” living in fancy housing and driving expensive cars.
While this may be admirable, the other side of the picture is extremely bleak. In some remote villages, many families are forced to take their children out of school because they are unable to pay educational costs. Official statistics show the number of rural children forced to drop off the education rolls is more than one million. This is a tragedy.
The only hope for rural children to move up the socio-economic ladder is to pass tough entrance exams to make it to university. But today, many farmers cannot afford steadily increasing university tuition, even if their children are admitted.
Last year, a Sichuan high school graduate committed suicide because he was unable to pay a 600 yuan fee to participate in the college entrance exam.
As the economy grows, land is increasingly becoming a sought after resource. But when farmlands are requisitioned, peasants often get little or no compensation while developers and corrupt officials pocket huge profits.
The bloody incident earlier this month in Dingzhou, Hebei province, is a good example. The operators of a power plant paid the market price for a parcel of land for expansion. But local officials gave each farming family only about 2,000 yuan as compensation for their land. The families suspected that officials simply stuck a large portion of the land requisition fund in their pockets. Angry farmers occupied the requisitioned land, seeking to block construction. On June 11, 300 attackers armed with iron bars and knives stormed the farmers’ temporary huts, killing four and injuring dozens. Luckily for the farmers, the media exposed the attack to catch Beijing’s attention. An investigation is now under way.
After the incident, a Dingzhou official brazenly blamed the farmers for breaking the law by occupying the requisitioned land. But throughout Chinese history, officials’ bullying and oppression ultimately have forced peasants to rebel.
In cities, many laid-off workers from state-owned enterprises also live in poverty. In 2003, 21 million urban people were living on social security and 30 million rural residents were living in poverty. Another 60 million were living on per capital annual incomes of US$100 (HK$780) or less. So at least 100 million Chinese must be considered to be desperately poor. Conversely, the growing wealth generated by the new economy appears to be going into the hands of a very few. A survey by New Fortune magazine shows that in 2003, the top 400 tycoons had amassed more than 303 billion yuan – more than triple the entire gross domestic product of Guizhou province. A recent survey by the National Bureau of Statistics also indicates that 10 percent of urban residents command 45 percent of the total wealth in mainland cities.
According to a Nankai University team headed by Chen Zongsheng, the Gini Coefficient in 1988 was 0.35 which however rose to about 0.5 in 2003. GC is a measurement of wealth disparity which takes a value between zero and one. The bigger the number the greater the disparity. A value of 0.4 is regarded a red alert and 0.5 means likely social unrest.
It is time for Beijing to seriously address this issue of a widening wealth gap or inevitably it will jeopardize the country’s further development.
zhong.wu@singtaonewscorp.com
Copyright 2005, The Standard, Sing Tao Newspaper Group and Global China Group. All rights reserved. No content may be redistributed or republished, either electronically or in print, without express written consent of The Standard.

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