China's wealth gap reaching critical level

Reuters
Friday, October 07, 2005

Guangzhou, China, October 7: Eight years ago, Chen Hua thought she'd put poverty behind her when she left her remote, mountain village in Sichuan province for a factory job in China's booming Pearl River Delta.

But even in one of the wealthiest and most dynamic parts of a country on the rise, she's finding the dividends of China's economic revolution do not always pay out.

Earlier this year, the garment workshop where she snipped dangling threads from clothes suddenly stopped paying wages. For several months, she and her colleagues kept working, hoping they would eventually be paid.

Then one day, the boss vanished and the factory closed.

Today, Chen, 53, hawks maps on a bridge near the Guangzhou train station in the capital of the southern province of Guangdong, where on a good day she earns 30 yuan ($3.72). For a time after the factory closed, she recycled trash for money.

"At least now I can stand in one place and don't have to walk around all day," she says with a stoic smile. When a policeman strolls down the ramp, though, she and the other vendors bolt the opposite way.

Fancy imported cars, five star hotels and slick malls dot Guangzhou, the hub of a region that has blossomed into one of China's -- and the world's -- main economic engines.

But Chen stands by the train station as a reminder of one of the most dangerous features to develop on China's socio-political landscape: the growing chasm between rich and poor in the world's seventh-biggest economy.

Persistent poverty in China's countryside, against the backdrop of fast growing cities, has sparked social unrest in some spots and elicited sympathy from the wider populace.

The public was outraged in 2003 when a driver in northeastern China ran over and killed a peasant with her BMW, but was given a light sentence.

The leadership in Beijing is deeply concerned there could be a wider backlash, threatening a decade of strong economic growth and the Communist Party's grip on power, says Wenran Jiang, a China expert at the University of Alberta.

"They have come to the conclusion that ... the regime will not survive if they don't address the growing wealth gap, and more importantly, the perception that the government only cares about economic growth and the urban rich," he said.

YELLOW LIGHT, RED LIGHT

When China's late paramount leader Deng Xiaoping ignited the country's market reforms in the late 1970s, he espoused a trickle-down approach, saying: "Let some people get rich first".

Some have become gloriously rich. Next week, the Hurun Report, which tracks China's wealthy, will issue its 7th annual China Rich List on which the average wealth for the richest top 400 is about $200 million. Seven are billionaires.

To be sure, tens of millions of people have been lifted out of abject poverty since the Party came to power 56 years ago.

But the wealthiest 10 per cent of China's urban households now own 45 per cent of the urban wealth while the poorest 10 per cent have less than 1.4 per cent, Chinese statistics show.

That has left Deng's successors, President Hu Jintao and Premier Wen Jiabao, grappling with a wealth differential that economists say is wider than when the Communist Party came to power in a 1949 revolution.

Average urban incomes last year were 9,400 yuan ($1,164) while rural income was 3,000 yuan ($372).

The newspaper of the Communist Party's premier cadre training ground, the Central Party School, reported recently that the wealth disparity had reached the "yellow" warning level and could become a "red" danger within five years.

"Social contradictions" are on the rise, it warned.

Beijing has taken steps to try to buoy rural incomes, allowing grain prices to rise and starting direct farm subsidies. It has also scrapped the agriculture tax, a centuries-old Chinese institution, and tried to abolish an array of crippling local fees.

But some of the measures, while lightening the burden on farmers, have bankrupted local governments, which are forced to raise cash elsewhere. The once robust Communist social safety net has vanished, and rural dwellers now pay for things like education and health care.

"In poor areas, there are a lot of conflicts between the government and the farmers," said Li Fan, director of the World and China Institute, a private thinktank in Beijing.

China's "Gini coefficient", a measure of inequality used by economists that runs on a scale from zero to one, is believed to be above 0.45, among the highest in the world. The closer to one, the greater the inequality, and the prospect for unrest.

"That means it's already a critical time," said Li.

To escape poverty, country dwellers keep pouring off trains in cities like Guangzhou and the nearby border boomtown of Shenzhen, where Liu Zhengde begs for change outside a candy store in a lively shopping district.

Originally from the Henan province in China's heartland, Liu has drifted for much of his life. He has never married, and his last job was selling fruit in the central city of Wuhan.

That venture failed a few months ago, leaving the equivalent of less than 6 US cents in the pocket of the weathered man with a wiry beard and wide eyes who, asked his age, says: "over 80".

"I couldn't even afford a steamed bun. Those cost five mao. All I had was four," he said. "Everybody said go to Guangdong."

The economic boom has made Guangdong one of the wealthiest places in China. But opportunity has been elusive for Liu who sleeps under bridges.

"All I want is enough money to buy a train ticket back home."