InCome Inequality in China

Income inequality in China[pic 1]

(Qiang Chen)[pic 2][pic 3]

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Let’s watch other datas. The graph on the right shows that the income inequality (Gini) kept on increasing from 1982, which means the China government hasn’t solved the problem of income distribution and the inequality of income is becoming worse. Also we can say that the disposable income of urban and rural households are increasingly quite fast, as we can find the data from the National Bureau of Statistics of the PRC, it still turns out that the household income is somehow growing slower than GDP.[pic 6][pic 7]

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This income inequality had a significant negative impact on China's economic growth. Mainly in the following aspects:

Firstly, it has negative affect on social stability. From past common experience, the Gini coefficient cordon is 0.4, above 0.5 the income disparity would be very big. In terms of the special social and political structure, the affordability of this inequality would be higher.

However, promoting market-oriented reformation depends on efficiency and the principle of fairness is an inevitable choice to China. However, at present, the income inequality due to monopoly and unfair competition is not the result of the market but violating rules of market economy. That would have significant negative impact on people’s enthusiasm, initiative and creativity.

Second, the widening income gap does no good to Consumption Demand Effect. Consumer demand, investment demand and net export demand is known as "Troika" to promote economic growth, among which the consumer demand is the most important. Therefore, in market economy, the key to stimulating economic growth is to stimulate consumption demand. Due to the expansion of the income gap and polarization, the total household consumption of GDP will decrease in terms of the principles of economy. [pic 12]

Third, income inequality has a negative impact on the industrial structure. On the one hand, the absolute income of different income groups affects their consumption demands, thereby changes the structure of demand for commodities, and ultimately affect the changes in the industrial structure.

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