Commentary on Political Economy

Thursday 24 December 2020


Ratland China Has a Huge Wealth-Gap Problem — and It's Getting Worse

What You Need To Know

For the majority of people in China who aren’t born into the elite, it’s becoming harder to climb the social ladder. As is often the case when countries develop, the rich can give their children a leg up using two common pathways to upward mobility: education and property ownership.

The gaokao — China’s notoriously grueling, dayslong college entrance exam — is increasingly seen as more of a barrier to opportunity than a gateway, largely due to a rapidly growing student population and a widening disparity between top schools and all the rest. Housing prices have skyrocketed in booming cities like Shenzhen, putting home ownership out of reach for millions of new arrivals.

Handshake Apartments in China's Tech Hub
  • Less than one fifth Of new undergraduates last year at top-ranked Tsinghua University from rural or less developed areas
  • 43.5x The cost of a Shenzen apartment relative to the city's average annual salary

Why It Matters

Ensuring wealth is more evenly distributed among China’s 1.4 billion people is necessary for President Xi Jinping to maintain support ahead of 2022, when a twice-a-decade leadership reshuffle could see him hold on to the presidency for a third term.

While China’s early containment of the virus allowed its economy to recover faster, tens of millions of low-income workers suffered disproportionately. Unlike earlier generations who were willing to sacrifice for the nation’s greater good, the current workforce has higher expectations after seeing first-hand the vast wealth that some have accumulated.

The government knows it has to address the problem, but it also risks a backlash if reforms are seen as unfair. Proposals to implement taxes on inheritance, property or wealth haven’t been implemented in part due to fears of hurting China’s emerging middle class. Meanwhile, an attempt to overhaul the gaokao system has met fierce opposition from parents and students who object to what feels like a rule-change at halftime.


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