Chinese Economic Reform - Effect On Inequality

Effect On Inequality

The economic reforms have increased inequality dramatically within China. Despite rapid economic growth which has virtually eliminated poverty in urban China and reduced it greatly in rural regions and the fact that living standards for everyone in China have drastically increased in comparison to the pre-reform era, the Gini coefficient of China is estimated to be above 0.45, comparable to many South American countries.

Increased inequality is attributed to the disappearance of the welfare state and differences between coastal and interior provinces, the latter being burdened by a larger state sector. Some Western scholars have suggested that reviving the welfare state and instituting a re-distributive income tax system is needed to relieve inequality, while some Chinese economists have suggested that privatizing state monopolies and distributing the proceeds to the population can reduce inequality.