Resource information
China has been the most rapidly growing
economy in the world over the past 25 years. This growth has
fueled a remarkable increase in per capita income and a
decline in the poverty rate from 64 percent at the beginning
of reform to 10 percent in 2004. At the same time, however,
different kinds of disparities have increased. Income
inequality has risen, propelled by the rural-urban income
gap and by the growing disparity between highly educated
urban professionals and the urban working class. There have
also been increases in inequality of health and education
outcomes. Some rise in inequality was inevitable as China
introduced a market system, but inequality may have been
exacerbated rather than mitigated by a number of policy
features. Restrictions on rural-urban migration have limited
opportunities for the relatively poor rural population. The
inability to sell or mortgage rural land has further reduced
opportunities. China has a uniquely decentralized fiscal
system that has relied on local government to fund basic
health and education. The result has been that poor villages
could not afford to provide good services, and poor
households could not afford the high private costs of basic
public services. Ironically, the large trade surplus that
China has built up in recent years is a further problem, in
that it stimulates an urban industrial sector that no longer
creates many jobs while restricting the government's
ability to increase spending to improve services and address
disparities. The government's recent policy shift to
encourage migration, fund education and health for poor
areas and poor households, and rebalance the economy away
from investment and exports toward domestic consumption and
public services should help reduce social disparities.
