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FEATURE of the Day
China's Wealth Inequality Of Epic Proportions
    Beijing - A new study shows income and asset inequality in China has reached epic proportions, with the top undertaxed and the bottom at grave social risk because of a lack of civil protection. The ‘1%’ figure has received a lot of attention over the last couple of weeks. And in fact, it's a useful way to observe what has gone horribly wrong in China socioeconomically speaking.

One group represents the top 1% of Chinese households, which a recent Beijing University study says own one-third of the national wealth. In other words, income and asset inequality is worsening.

Meanwhile, the bottom 1% is comprised of the 13 million so-called hei-hu or ‘black households,’ families whose parents gave birth to several children while the country's notorious one-child policy was in force. They are overwhelmingly poor families, whose parents still risk being charged the ‘social compensation fee,’ a severe financial penalty, for violating the policy that was finally ended in October. Because the government has so far failed to grant any exemptions for families who had children 'illegally,' these households fear that reporting their children now, so that they can obtain proper citizenship for them, might provide the proof necessary for authorities to issue fines.

These two 1% groups represent the extremes of Chinese society. The wealthy reside at the top, and those of them who had more children than officially allowed would have no trouble paying the fine or bribing a corrupt official to obtain proper citizenship for their children.

Meanwhile, most of the parents in the hei-hu households can't afford the astronomical sum. Not only do the children in these families live without proper identities, therefore excluding them from schools and jobs, they aren't even entitled to buy so much as train tickets.

These two unrelated groups of people form a contemporary Chinese fable. As famous commentator Xiao Feng put it sarcastically, ‘While the top 1% doesn't necessarily care to possess their Chinese nationality, the bottom 1% would like to have one, but are denied it.’

Sadly, the reality is that without any basic civil protection in the long term, the bottom 1% will fall even further into abject poverty.

This Beijing University report is based on a survey tracing 14,960 families in 25 provinces, with the aim of shedding light on their livelihoods and various situations, in addition to the the causes and social mechanisms at play.

We need to reflect on what political, economic and social causes lead to this inequality. Take taxes as an example. China's tax burden is mainly born by the middle- and lower-income classes. The tax burden on wealthy Chinese people is much lighter than in foreign peer countries. Dong Mingzhu, the CEO of China's white goods giant Gree and among the country's richest businesswomen, said it plainly: ‘Certain bosses claim all their personal expenses as their firm's costs so they pay next to nothing as income tax.’ From educational opportunities to income inequality to health care, major social issues in China have a tendency to worsen, mostly because of government policy.

President Xi Jinping has vowed that the Thirteenth Plan, the national economic development blueprint for 2016 to 2020, will help China build a moderately prosperous society. The anxiety about China's 13 million people who comprise the social bottom concerns the entire country. Whether the problem is derived from an historical legacy or from a contemporary one, it must be resolved.

Credit Text: Economic Observer
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