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Development Strategy and Regional Economy

China’s Income Gap: General Performance and Solutions(No.102, 2017)


By Shi Shujie, Department of Development Strategy and Regional Economy, DRC

Research Report, No.102, 2017 (Total 5177) 2017-08-28

Abstract: China’s income gap has been narrowed since 2008, but inequality in income distribution still remains at a high level. The urban-rural income gap presents an inverted N trajectory, showing a fall, rise and fall again curve, with the pace of gap reduction becoming slowdown and in some sectors the gap even becoming larger. Meanwhile, wealth gap is rapidly increasing, with a rising contribution resulting from the property income gap. Generally speaking, the evolution of income gap is uncertain. Despite the advantages for us to narrow income gap, we also face the following restrictions. First, the Lewis turning point has appeared, but we are still restricted by globalization in the relative bargaining power of labor and capital. Second, the clustered productive factors are getting more dispersed, but this dispersal effect is restricted by the inadequacy of market for the improvement of spatial development layout. Third, the national development strategy becomes more balanced, but public service inputs are distributed unevenly. Fourth, though the social security system has taken an initial shape, the Matthew Effect in wealth inequality cannot be contained. In the new era, we need to make efforts to foster a nationwide unified market and promote public service equalization; support the development of private economy and strengthen redistribution measures; open the door wider to the outside world and leverage the role of “growth dividends”.

Key words: income gap, development stage, market reform, government transformation