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China's Income Gap Widening; ADB Says Addressing Rural Poverty is the Solution

Published by MAC on 2006-08-22

China's Income Gap Widening; ADB Says Addressing Rural Poverty is the Solution

By Zijun Li, Worldwatch Institute (

22nd August 2006

A recent study by China’s National Development Reform Commission reports that the country’s Gini Index, a measure of household income distribution, has reached 0.4 (up from 0.37 in 2003), indicating that the rich-poor gap nationwide continues to grow. Widening income disparities between urban and rural areas are unlikely to be reversed in the next decade, according to [1] Fan Gang, director of the National Economic Research Institute at China’s Reform Foundation [2].

Xinhua News Agency [3] reports that Chinese farmers’ incomes in the first half of 2006 increased at a slower pace than the corresponding period last year: average annual earnings increased 11.9 percent, to 1, 797 RMB (US $225), but the overall growth rate was down 0.6 percent from the same term last year. Among urban residents, average disposable incomes grew 10.2 percent to 5,997 RMB ($750), a rate 0.7 percent higher than in 2005.

The slower growth in farmers’ incomes is attributed to ongoing declines in the prices of primary products such as grain and livestock, and simultaneous increases in the costs of agricultural production inputs; this trend has reduced average net income by 30–50 RMB ($4–$6), according to Xinhua News Agency [4].

Overall, the average net income of China’s farmers has increased at a rate of 6.2 percent, far below the 9.6 percent growth witnessed in urban areas.

Experts note that the income gap within China’s urban areas is even greater than that between urban and rural regions, and is the major culprit behind overall disparities between rich and poor, according to Shanghai Security Newspaper. The Chinese Academy of Social Sciences’ 2005 Social Blue Book [5] reports that the disposable income of some 60 percent of urban residents is lower than the national average, according to People’s Daily [6].

While disparities in income distribution are considered inevitable during China’s economic transition, the speed at which the gap is widening has raised concerns. Haruhiko Kuroda, President of the Asian Development Bank, warns [7] that China should step up efforts to reduce imbalances between urban and rural development and focus greater attention on helping the most economically depressed areas shrug off poverty.


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