China lets Gini out of the bottle; wide wealth gap

BEIJING Fri Jan 18, 2013 2:00pm IST

Clothes are seen hanging outside a bus which has been converted into a dwelling for Lu Changshan and his wife, near newly-constructed residential buildings in Hefei, Anhui province, November 12, 2012. REUTERS/Stringer

Clothes are seen hanging outside a bus which has been converted into a dwelling for Lu Changshan and his wife, near newly-constructed residential buildings in Hefei, Anhui province, November 12, 2012.

Credit: Reuters/Stringer

BEIJING (Reuters) - China's statistics chief declared on Friday there was an urgent need for reforms to narrow the income gap between rich and poor, addressing head-on an issue that officialdom has ducked for years.

Releasing a recalculated indicator of economic inequality on Friday, Ma Jiantang, the head of the National Bureau of Statistics, said the wealth gap remained "relatively large" though the Gini coefficient, a measure of income disparity widely used by economists, has narrowed since peaking in 2008.

China's Gini coefficient stood at 0.474 in 2012, down from 0.477 in 2011 and from a peak of 0.491 in 2008, Ma said.

"This curve of Gini coefficient demonstrates the urgency for our country to speed up reform of the income distribution system to narrow the poor-rich gap," Ma told reporters at a press conference on 2012 economic performance.

"A Gini coefficient between 0.47-0.49 shows that the gap in income distribution is relatively large."

China had not provided an official Gini coefficient since 2005, claiming that it was too difficult to calculate given rampant under-reporting of incomes, particularly by the wealthy.

The index ranges from 0 to 1, with the 0.4 mark viewed by analysts as the point at which social dissatisfaction may come to a head.

In China, the economic gulf between the urban and industrialized workforce and the rural population complicates the calculation.

Ma said there was a three-fold income gap between rural and urban areas while there was a four-fold gap between workers in the most profitable industry and those in the least lucrative industry.

"We should improve our efforts to divide the cake. When we are building our 'well-off' society, we should not only double people's average income and GDP, but also better distribute the national wealth and give mid-to—low income residents a bigger part of the pie," Ma said, echoing policy priorities among some fiscal reformers.

Details have yet to emerge in a promised plan to better distribute income in part by tapping more revenues from state-owned firms.

Ma said the World Bank put China's Gini coefficient at 0.474 in 2008. The World Bank's last published figure - 0.425 - was for 2005.

A recent survey by a Chinese university in Chengdu, the Southwest University of Finance and Economics, put the country's Gini coefficient at 0.61 in 2010.

GROWING DISPARITY

Purged populist politician Bo Xilai, who was angling for a top national post before being detained in a murder scandal earlier this year, needled his rivals during his final press conference in March by announcing that China's Gini coefficient had exceeded 0.46.

Bo's revelation underscored his appeal to leftists and others who feel left behind in the midst of China's growing prosperity. The figure he used appeared to come from a 2006 study by the Ministry of Finance.

Still officially Communist, China has witnessed a growing disparity between the prosperous cities and the impoverished countryside since the early 1990s, while lower-income city residents have been left out of a property boom that enriched many since the housing market debuted in the late 1990s.

China has 2.7 million U.S. dollar millionaires and 251 billionaires, according to the Hurun Report, but 13 percent of its people live on less than $1.25 per day according to United Nations data. The average annual urban disposable income is just 21,810 yuan ($3,500).

Even relatively well-off Chinese resent the luxury cars and other signs of conspicuous consumption by elite insiders and their children.

Since 2008, the growth rate in rural incomes exceeded the growth in urban incomes, while programs to expand health insurance and pension coverage were rolled out as part of a national stimulus to stave off the impact of the global financial crisis.

The newly-appointed head of China's ruling Communist Party, Xi Jinping, has taken a number of steps to establish an image of openness and plain-speaking to appeal to citizens disenchanted with corruption and stifling bureaucracy.

(Writing by Lucy Hornby; Editing by Richard Borsuk/Simon Cameron-Moore)

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