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What Caused Wealth Gap in Beijing?

What Caused Wealth Gap in Beijing?

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What Caused Wealth Gap in Beijing?

Introduction

China performed well in its economy during the 1970s, but the rapid growth the nation has experienced over the recent past has introduced problems to the Asian-Pacific country. The country witnesses changes in its level of wealth inequality with significant alterations happening over the past twelve years. The Gini coefficient that measures the level of socioeconomic variation in a country or region escalated to the highest point in 2008 when it recorded 0.491 before declining towards the period approaching 2010 (Han, Zhao & Zhang, 2016). The level escalated to 0.469 in 2014 thereby signaling an unstable state of equity. Even though the level seems to be falling at some point, the current level of 0.482 is still high than the required 0.4 that serves as the warning mark for inequality. It is worrying that China still has a long way to catch up with some nations such as the U.S. that assumes a capitalist market structure. The pace achieved over the past half a decade 0.02 (0.49 to 0.47 from 2009 to 2014) mean that China may require up to 15 years to attain the status of America regarding Gine coefficient (Han, Zhao & Zhang, 2016). The Chinese nation must identify the factors that deter it from achieving income equality and take measures that would restore a situation where the citizens have almost equal chances of owning wealth. The country would witness more growth in its economy that is already flourishing should the relevant parties take quick initiatives to address the issue.

Literature Review

China has become one of the leading economies globally surpassing giants such as Japan and only being one step behind the U.S. Despite the growth, it is common to experience many citizens leading deplorable lives and Rapoza (2013) states that it is common to see many poor citizens offering candy and working for the insignificant population that owns large volumes of wealth. The Gini coefficient (a standard that measures the social equality and mobility set by the United Nation (Leng, 2017), indicates that China scored as low as 0.474 in 2012 which is lower than the 0.4 mark set by the UN. Even though some Chinese analysts feel that the figure is knowingly exaggerated, Han, Zhao, and Zhang (2016) refer to the tool as the most authoritative and suitable framework to determine social inequality, particularly in the global scale. The revelation by China’s National Bureau of Statistics (NBS) signaled that the disparity might have worse implications than anticipated unless the relevant authorities take the appropriate measures to resolve the situation.

The escalating wealth gap that comes with the growing Chinese economy increases the risk of social unsteadiness in the globe’s most populous country. Zhou and Song (2016) write that the Chinese now view income instability as a severe social issue that deserves urgent address. Zhou and Song (2016) proceed to state that even though many citizens do consider the situation to be impressive, they seem to tolerate it as a fact of life. The condition that now occurs as a social problem may have severe effects on the economy that depicts positive transition and this may harm the nation as a whole.

Indications suggest that the increased rural to urban migration in China has contributed towards the wealth disparity in Beijing. Erbiao (2005) perform a qualitative study while applying the literature review methodology to identify the wealth disparity between city inhabitants and immigrants who do not have the urban registration status and who are regarded as temporary citizens. Erbiao (2005) finds that the deregulation of policies inhibiting rural-urban migration over the years has attracted may rural laborers into the cities thus forming part of the urban community and also influencing the urban income distribution. The investigator who acquires data from NBS and Chinese Academy of Social Sciences (CASS) find that the migrant households get lower income compared to the dwellers in Beijing. Even though some scholars imply that the effect of migrant families on intra-urban income may not be significant because the newcomers (rural migrants) are majorly young workers who have lower per capita income standard, the World Bank considers the shift to be having a severe impact on the socioeconomic disparity in the city. The city dwellers seem to be getting higher pay compared to their counterparts from the rural region indicating that the people who do not have registration status are entirely overlooked. Erbiao (2005) calls on readers to understand that even though the migrants’ households comprise of younger laborers and their mean household size may appear to be smaller than the permanent residents who may make their average per capita income to be relatively higher that is not usually the case. The emerging trend is that the city dwellers record higher pays compared to the newcomers.

The difference in the region appears to be a significant determinant of income in China than it is in America. Xie and Zhou (2014) report that relative to the U.S. the income imbalance in China is primarily as a result of rural and urban divide and by the regional disparities. Xie and Zhou (2014) attribute about 12% of the income inequality in China to provincial differences while the state variations cause a discrepancy of less than 2% in the U.S. Similarly, the division between urban and rural settings contributes to more than 10% of the inequality in China, but the difference in the two settings does not have any effect in America. The family structure, according to the paper by Xie and Zhou (2014) contributes significantly to cases of inequality causing up to 12% of such cases in the Western nation compared to the 2% in China. Xie and Zhou (2014) attribute the difference to the high number of single-parent families in America than in China (7.9% of the U.S population versus 1.9% of the Chinese people).

Han, Zhao, and Zhang (2016) also support the idea that the most significant gap in wealth occur between the rural and urban dwellers, but also consider the income inequalities among the administrative areas and industrial imbalance to be significant facilitators of the disparity. It appears that companies reserve the administrative positions to specific groups of people who meet specific socioeconomic status while forsaking individuals who do not exhibit the desired qualities. The discrimination in the way companies absorbs service providers mean that the less fortunate are not likely to secure position in any firm that offers lucrative pay.

Apart from the increasing division between the payment city dwellers and migrants get, Beijing now experiences wage disparity because of the biased economic policies that pay more attention to the urban than the rural settings. Xie and Zhou (2014) who acquire data from the China Family Panel Studies (CFPS) with the objective of identifying the level of income inequality in China and also to find out why the level remains to be high postulate that the political structures continue to uphold beliefs and assumptions that are placed to boost economic growth. The political initiatives, however, seem to have far-reaching effects than anticipated because the economic policy created in the 1980s pay much focus on the urban areas forgetting the less developed locations.

Finally, the level of education serves a significant determining factor for wealth inequality in China, in the same way, it happens in the U.S. Xie and Zhou (2014) imply that it becomes quite difficult to achieve higher pay when the head of the family lacks the knowledge that would help others to be independent. Lu (2012) finds that the rampant internal migrations in China disrupt the learning processes of many children who remain in the rural setting when the parents move to the urban environments in the quest for work. The children who enter into alternative livelihoods have no option but to perform minor tasks that do not fetch appealing wages. Zhang et al. (2014) concur with the idea that lack of parental guidance as it happens with Chinese parents who move into urban settings hampers the cognitive abilities of the children who do not see the need of focusing on their education. Zhang et al. (2014) assert that the few who get the opportunity to proceed with their schooling even in their parents’ absence record lower grades and have higher chances of dropping out before completing the course. The advanced awareness about the benefits of education in big cities such as Beijing compels employers to absorb highly qualified personnel leaving the less skilled and uneducated with no chance in the well-paying jobs.

Methodology

Han, Zhao, and Zhang perform a study to identify China’s income inequality in comparison with other nations of the world, mainly European states. The scholars measure and determine whether polarization exists between the poor and the rich and to find out the nature of the interaction. Han, Zhao, and Zhang (2016) adopt the comparative method as the primary research strategy because the investigation majorly seeks to compare the Asian-Pacific’s level of income inequality with that of other nations. The investigator uses the Gini Coefficient degree and the Percentage of Total Income of National Population by Income Quintile as the primary tools to undertake the research. Han, Zhao, and Zhang (2016) acquire data from the NBS and also garner statistics from Wind Information that mostly relies on NBS for its data. The researchers argue that obtaining data from a single source makes it easier to compare the information and to carry out the process.

The investigators use European countries as the standard measure for identifying China’s level of inequality because both regions share the ideology that everyone is born equal and also because the market socialism structure is similar. Han, Zhao, and Zhang (2016) use data from 2004-2013 to compare China’s Gini coefficient with five nations from northern, southern, eastern, and western Europe and also with the Gini coefficient of Latin American states.

The investigators find from the comparison that China’s mean Gini coefficient in the past decade is 0.482 while that of the 27 countries in the European Union average to 0.305. The surveyors proclaim that the Asian-Pacific’s Gini coefficient is fifty eight percent higher than that of the European Union (Han, Zhao, & Zhang, 2016). Comparing China’s Gini coefficient with Germany, for example, it emerges that the country in Asia is sixty seven percent higher than the European state that is acknowledged as the country with a socialist market (Han, Zhao, & Zhang, 2016). A comparison with the Latin American nations reveals that China scores relatively lower compared to the 0.4864 of the Latin countries, but significantly higher than that of several other continents. The chart below provides a visual presentation of how China’s Gini coefficient compares with some EU nations;

Source: Han, Zhao and Zhang, 2016

Analysis and Discussion

The study by Han, Zhao, and Zhang (2016) confirms that China’s level of wealth inequality falls among the leading in the world, not only surpassing that of western developed nations but also beyond Asia’s average of 0.3513. It is evident that the level does not adhere to the nature of socialists. Unfortunately, the gap may not go down if the invisible income in the country remains at the high point of 9.3 trillion Yuan, and the gray income remains at the current state of 5.4 trillion Yuan (Han, Zhao & Zhang, 2016). Furthermore, it may be difficult for China to minimize the wealth gap when the country’s leading 10% household revenue is sixty five times higher than the lowest ten percent households. Han, Zhao, and Zhang (2016) make readers aware that if it were possible to consider the income of corrupt officials, then the disparity between the poor and the rich would be one hundred times which make the whole situation scary.

The findings of the study by Han, Zhao, and Zhang pose salient questions that need urgent and practical measures that would result in the desired outcomes. An appropriate intervention plan would be to provide more working opportunities to the people coming into the city and to allocate more pay to the migrants. The government should work hand-in-hand with the department of labor to ensure that more work opportunities develop to accommodate the increasing city population. It may also be essential to streamline the policies governing economic development to achieve a scenario where economic growth occurs in the rural and urban settings. The government needs to understand that making equal growth requires the upgrading of all areas on an equal basis without looking at the religious, social, or cultural groups that inhabit the region (Green, 2013). The same development opportunities should come together with increased educational practices in the interior places to bring up children who are well-equipped to serve in the cities. The intervening teams should embrace the SMART approach where the adopted measures are specific, measurable, achievable, realistic, and time-related. The plan following the information by Dwyer and Hopwood (2010) give planners the opportunity to focus on the issue at hand without paying attention to non-helpful areas. Otherwise, failing to address the impeding factors may prolong the wealth gap in the city.

Conclusion

China needs to identify the factors that inhibit it from minimizing the wealth gap in the country. The current Gini coefficient (0.47) is relatively higher than some of the continents, an indication that something is wrong. The case in China is as a result of the increased rural-urban migration where many rural dwellers move to the city without the required working skills. The government’s incapability to develop the rural and urban settings on equal basis further derails the efforts to achieve socioeconomic equality in the city. The imbalanced economic development urges the dwellers of rural setting to move into Beijing with the hope of finding better jobs only to settle in areas that offer negligible remunerations. The lack of educational knowledge also acts as a significant inhibitory factor that makes it problematic to achieve equality. The government and other relevant authorities should take a SMART approach that would address the inhibitory elements to achieve a society where the wealth gap is relatively lower compared with the present state.

 

 

 

 

 

 

References

Dwyer, J., & Hopwood, N. (2010). Management strategies and skills. New York, NY: McGraw-Hill.

Erbiao, D. (2005). Income inequality in urban China: A case study of Beijing. The International Center for the Study of East Asian Development Working Paper Series, 1-22.

Green, G. (2013). Handbook of rural development. London: Edward Elgar Publishing.

Han, J., Zhao, Q., & Zhang, M. (2016). China’s income inequality in the global context. Perspectives in Science, 7, 24-29.

Leng, S. (2017). China’s dirty little secret: Its growing wealth gap. Retrieved from http://www.scmp.com/news/china/economy/article/2101775/chinas-rich-grabbing-bigger-slice-pie-ever

Lu, Y. (2012). Education of children left behind in rural China. Journal of Marriage and Family, 74(2), 328-341.

Rapoza, K. (2013). The China miracle: A rising wealth gap. Retrieved from https://www.forbes.com/sites/kenrapoza/2013/01/20/the-china-miracle-a-rising-wealth-gap/#ad13672226a4

Xie, Y., & Zhou, X. (2014). Income inequality in today’s China. PNAS, 111(19), 6928-6933.

Zhang et al. (2014). Does parental absence reduce cognitive achievements? Evidence from rural China. Journal of Development Economics, 111, 181-195.

Zhou and Song (2016). Income inequalities in China: Causes and policy responses. China Economic Journal, 9(2), 43-49.

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