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Updated: August 16, 2012 02:11 IST

In China, alarm over widening income gap

Ananth Krishnan
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The Hindu

A resident in urban China earns as much as 5.2 times what a rural Chinese takes home — the widest ever income gap in the country’s history — according to a new study released this week by a leading Beijing think-tank.

The study, published by the Chinese Academy of Social Sciences (CASS) on Monday, said the urban-rural income gap last year was 68 per cent higher than in 1985.

The government-run centre’s Urban Blue Book measured the urbanisation rate in major cities and also estimated the spending needed to build a social security system for new urban residents. It described the next five to 10 years as “a key period for China to turn from a village-based to a city-based country and enhance the quality of urbanisation”.

Last year, the urban population for the first time exceeded the number of rural residents — a landmark in the rapid urbanisation over the past three decades since the introduction of “reform and opening up”.

The urbanisation rate in 2011 was 51.27 per cent, with 691 million residents in cities. The study estimated that a further 500 million rural residents would need to be “urbanised” in the next two decades.

It estimated the cost of providing social security to the new urban residents at four to five trillion Yuan (or US$ 794 billion) in the next 20 years.

China’s rapid urbanisation had left record income gaps between urban and rural Chinese, the study found. The disposable income of urban Chinese was 3.13 times that of the net income of rural residents. With rural Chinese spending 40 per cent of their net income buying fertilizers, seeds and farm equipment, the real income gap was much wider, it said, estimating the average urban income at 5.2 times the average income in rural areas.

The study stressed the need for the government to boost provision of social security services to address the gap. Scholars have cited the lack of access to social welfare for China’s more than 200 million migrant workers — classified as rurally registered but living in cities — as a major source of inequalities.

Calls have grown in recent years for the government to reform its decades-old system of household registration or “hukou”, which denies access to social security to rural residents when they move to cities.

While officials argue that the system has regulated migration and prevented the emergence of slums in Chinese cities, critics say the restrictions which deny access to free healthcare and education for migrants have fuelled income divides. Sheng Guangyao, a researcher with CASS who was involved in the study, told Global Times that the system of “neglecting rural growth and supporting thriving urban areas has hindered the country’s urbanisation”.

Kang Houming, one of three migrant worker representatives of the National People’s Congress (NPC) or parliament, told The Hindu in an interview that hukou reforms were essential to address inequalities.

He cited the experience of his hometown Chongqing — China’s biggest municipality — on addressing the issue by relaxing restrictions and providing subsidised housing.

“More than 2 million migrant workers have been given rights because of the reform,” he said, pointing out that any worker who had spent three years in the city was eligible to access the same rights as urban residents. “When I came to Chongqing, few workers had social security” he added. “With the reform, the problems of housing, inequalities and of lack of access to education have all been addressed. This is a lesson for the rest of the country”.

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