Analysing China's Growth and Inequality

Analysing China's Growth and Inequality

Timothy Taylor 12/04/2019 4
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Since 1978, China's share of world population has declined mildly from 23% to about 19%. In those same 40 yeas, China's share of world GDP has risen dramatically from 3% to about 20%. Here's China's share of world population and the global economy since the start of its economic reforms.

Here's a sens of this economic growth on a per adult basis. The vertical axis is in yuan, so for US readers one might want to divide by the exchange rate of roughly 6.5 yuan/dollar. But look at the annual growth rates of national income per adult--especially the average of 8.1% per year from 1998-2015.  


These images are taken from an article by Thomas Piketty, Li Yang and Gabriel Zucman, "Income inequality is growing fast in China and making it look more like the US: Study provides the first systematic estimates of the level and structure of China’s national wealth since the beginning of market reforms," which appears at the LSE Business Review website (April 1, 2019). It's a preview of their forthcoming research article in the American Economic Review. The main focus of their research has been to look at income and wealth inequality--and in particular, data on patterns of wealth in China has been hard to find. 
Here's the pattern of  China's national wealth over time, expresses as a share of national income. Wealth includes the value of companies, the value of the housing stock, and other assets. China's wealth as a share of national income has almost doubled since 1978. And all of the increase is a result of rising wealth by households, not government. 


Finally, here's a figure showing China's shift in income inequality over time. China's economic growth has meant a larger share of income for the top 10%, and a falling share for the bottom 50%. 


The authors write: "To summarise, the level of inequality in China in the late 1970s used to be less than the European average – closer to those observed in the most egalitarian Nordic countries – but they are now approaching a level that is almost comparable with the USA." Of course, it's important to remember that in a Chinese economy that has been growing rapidly for decades, this doesn't means that the bottom 50% have had stagnant growth in income or are actually worse off in absolute terms. It just means that the growth in incomes for the bottom half hasn't been as rapid as for the top 10%. 
 
A version of this article first appeared on Conversable Economist

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  • Stephen Upton

    Well put together!

  • Dennis Tucker

    China might surpass the US !

  • Nathan Grey

    China has become a blessing to the world.

  • Josh Robson

    In such a short time they still have achieved so much.

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Timothy Taylor

Global Economy Guru

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.

   

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