China, once known as the world’s factory, is now increasing its presence as a major consumer country. However, the economic gap in China is widening and it has become a social problem. We have summarized the causes of disparities, which can be described as a challenge for the Chinese economy.
Disparity in China that cannot be seen from the “”explosive buying””
We often see Chinese tourists in famous hotels and tourist spots. Furthermore, from around 2015, many media covered “”explosive buying”” in which Chinese tourists visited Japan on tours and bought goods. You may remember that it was chosen for the annual buzzwords-of-the-year contest in 2015.
In particular, during the Spring Festival, a large amount of consumer spending is taking place in Japan, creating a major business opportunity for Japanese companies. One of the reasons for explosive buying is that under the Chinese tax system, it is cheaper to buy Japanese products in Japan than in China.
It is also said that China, which has close ties with family and relatives, buys cosmetics and food in large quantities and gives them as souvenirs. However, the Chinese people who are enjoying such heavy consumption are only a small part of the population of over 1.3 billion people. It is estimated that there are fewer than 4 million wealthy people in China, with about 900 million living in economically developing rural areas.
The income ratio of urban residents to rural farmers has been calculated to be three times or more on national average. While wealthy people can afford to buy brand-name goods and travel abroad, agriculture alone is not enough to make a living.
Rural areas far from urban areas face many inconveniences due to lack of transportation infrastructure. Inequality tends to accelerate due to a shortage of goods. There are also institutional constraints on moving from rural to urban areas. These complex factors have led to social problems in areas with many poor people.
cause of inequality in the communist bloc
China is a communist country with a long history. Communism is based on the idea that the country should share the benefits of working together to create an economically equal society. On the other hand, the real estate bubble in China created the gap.
China carried out economic reforms to introduce a market economy while maintaining communism. Through this policy, special economic zones and economic technology development zones in coastal areas were created. China tried to incorporate foreign capital and advanced foreign technology by establishing special economic zones.
Also, for foreign companies, entering China, where labor is cheap and tax incentives are available, was an economically rational investment. A special economic zone was established along the coast because it was convenient to transport raw materials and products.
This has led to the development of Chinese industry in coastal cities. As a result, urbanization has progressed rapidly and the living standards of residents have improved. Also, people who owned apartments and real estate in coastal areas gained enormous profits as their asset values grew. Many wealthy people have benefited from this real estate bubble.
On the other hand, inland and rural areas have fallen behind in this economic development. In response, China promoted a project called the Great Western Development to bridge the gap between coastal cities and inland farming villages.
This program designates 12 inland provinces, cities, and autonomous regions as western regions for the development of infrastructure such as railways, roads, airports, and industrial parks. Another purpose was to develop energy resources and supply them to coastal areas. The development of the western region is expected to create new jobs.
China Increasingly Moves to Rectify Inequality
China’s family registration system is a symbol of the gap between urban and rural areas. The Chinese family register is divided into the rural family register and the urban family register, and compared to the urban family register, there are restrictions on education.
However, the family registration system reform started in 2014 to correct the income gap. The government has indicated it will eventually convert all people’s family registers into city registers through the Family Registration System Reform. It also says it will have 100 million farmers as city register holders by 2020.
Although the family registration system reform is expected to produce some results, it cannot be said that it will solve China’s disparities. Even if the gap in the family register is eliminated, there is no change in the fact that farmers who come to work in urban areas receive low wages and white-collar workers in urban areas receive high incomes.
In addition, if it becomes easier to work in urban areas, there is a risk of rapid depopulation in rural areas. Not only the family registration system reform, but also the expansion of income itself is essential to correct the disparity.
The Chinese economy has a major impact on the world economy. If the economy stagnates due to the rising unemployment rate in China, it will become a big problem for the world. Trends in China are a topic of great interest from overseas. Let’s keep a close eye on the trends in local areas where changes are expected in the future.