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How far do you agree that inequality remains the greatest threat to Chinas

economic development?
After Chinas opening up in 1978, the egalitarian society that communism aspires to
create growingly became a distant dream and what came in its place is a
capitalistic-style system that inevitably creates and worsens inequality. While
inequality has been a great challenge to Chinas economy as it generates a large
amount of social instability and undermines the premise of growth, it is not
irreconcilable and large amount of governmental efforts have been put in place to
ameliorate the situation. Hence, this essay seeks to argue that although inequality
is one of the sticky and pestilential problems China faces in developing its economy
henceforth, it is not the fundamentally greatest threat to the China faces as long as
there are sufficient political will to allocate resources more equitably in such a way
that the income gap narrows and not widens as the economy growth.
Income inequality can lead to social dissatisfaction and unrests, thereby unsettling
the stability that has afforded China its economic growth. Due to Chinas unequal
development policies that had let some get rich first, between developed coastal
cities and underdeveloped inland provinces, there is a huge income gap. Rapid
urbanization accentuates that difference in material living standards such as
education opportunities and medical benefit between rural residents and urbanites.
Coastal Chinas GDP is 8.5trillion yuan in 2004, compared to 6.8trillion yuan, the
combined GDP of the rest of China. Gini coefficient for income distribution rose from
0.46 in 2005 to 0.477 in 2011 to 0.474 by 2012; and analysts still argue that the
actual disparity is much worst. Even with the economy achieving double-digit
growth in the aftermath of the 2008-2009 global financial crises, 200million Chinese
still lived in poverty at about US$1.25 per day. Given its severity, urban-rural
division may be a challenge to Chinas economic development.
However, measures undertaken by the CCP government to ameliorate income
inequality are beginning to show results, thereby possibly limiting its impact on
Chinas economic development. For example, government has instituted
preferential policies for the development of the western regions included more
investment, preferential tax rates and greater flexibility in development policies. In
2003, China invested about US$24.3billion in infrastructure projects in the western
regions, amounting to 55.2% of the countrys total annual investment in the region.
Instead of promoting the Western Region as a labor intensive manufacturing region,
the government placed the focus on creating new industries and environmentally
friendly technology to exploit natural resources in the western region. Large scale
infrastructure projects such as Qinghai-Tibet railway project and natural gas pipeline
project aim to help in reducing geography-related constraints such as roads and
railways might help in reducing transportation costs.
Rural poverty, as a result of income inequality, is responsible for the influx of
migrants to the cities, resulting in the demise of Chinas agricultural sector that has
helped to sustain its economic growth. Dengs reforms subordinated agrarian
growth to Chinas industrialization and urbanization programs where countryside
was primarily to support the cities with affordable and ample food. Low income and
inferior living quality in the countryside have resulted in many peasants abandoning
their rural livelihood. Millions migrated to the cities while lands are untilled. This,

coupled with rapid urbanization in the inland provinces, has caused much arable
land to be wasted. Even for those that stayed back, as there are few resources
available for investment, agricultural productivity remains grossly inefficient.
Moreover, with many farmers preferring to grow cash crops over food crops, the
prices of food are pressured to increase as food supply becomes scarcer,
undercutting the low cost of food the Chinese economy had leveraged on to grow.
However, preferential policies implemented to help the declining agrarian sector
have also helped to contain some negative repercussions of income inequality on
Chinas economic development. The government has vowed to keep at least
120million hectares of arable lands for agriculture. From 2008, China is also
purchasing farmlands on parts of Africa to grow its food. Foreign food purchases are
made from countries like Australia and Brazil. Number One document, a direct
subsidy and elimination of taxes for the peasants, has increased the amount of
subsidies given to peasants sharply. Government also encourages township
enterprises to increase revenue for the farming families. This is generally beneficial
for participating localities. Subsidies for rural residents have been given out to spur
their consumption ability and for the purchase of household appliances especially
during the 2009 global financial crisis.
Income inequality has led to mass migration that strained the capacity of cities,
causing socio-economic problems that can impede Chinas development. Slogans
promoted by Deng such as Getting Rich is Glorious and Poverty Does not Belong to
Socialism have given rise to an eagerness to migrate to cities to enjoy urban life.
Since most human resources and capital move from the poor regions to prosperous
regions under the market economy system, poverty in western China and ethnic
minority regions is increasing. As large numbers of migrant workers become
second class urban citizens, they are discriminated against and segregated from
the rest of the urban population, excluded from social insurance such as pension
insurance, unemployment insurance and health insurance leading to social
inequality. Obstacles placed by employers and urban authorities to exclude poorer
and less educated migrants from entering the primary labor market also reduce
their chances of upward mobility.
However, stress on Chinas development by the problem of income inequality, is
also lessened by the shift in manufacturing gravity from the prosperous coastal
cities to the inland provinces. The Chinese government has allocated more
infrastructure investments and international development agencies loans to the
central and western regions. Developmental efforts in Shaanxi, Sichuan, Chongqing,
Yunan and Xinjiang have also been accelerated. For example, in 2003, China
investment US$24.3billion in infrastural projects in the western regions, amounting
to 55.2% of the countrys total annual investment in the region. Eight key projects
were completed by 2003, including three road construction projects, an airport
extension in Shaanxi Province and four west-east electricity transmission projects.
In conclusion, inequality has been a great challenge to Chinas economy as it
generates a large amount of social instability and undermines the premise of
growth. However, it is not irreconcilable and large amount of governmental efforts
have been put in place to ameliorate the situation. In tackling income equality, the

enemy of is not economic development, but inequitable distribution of resources.


With sufficient political resolve, income inequality is a problem that can be solved.