Abstract

Rapid growth has fuelled strong improvements in living standards, but the benefits of growth remain unequally spread.

The rapid expansion of China’s economy has greatly improved living standards, but continued progress calls for a greater emphasis on sharing out the proceeds of growth. With 30 years of annual average GDP growth of around 10%, disposable incomes have soared, lifting hundreds of millions of people out of extreme poverty. However, the rate of China’s economic expansion has begun to slow, and growth of GDP per capita is projected to moderate to about 6% per year by the late 2010s. To continue to bestow strong improvements in material living standards on the population at large, policies will need to focus on reforms to improve productivity and to make growth more inclusive, so that a larger number of citizens are given the opportunity to create wealth and benefit more from economic growth.

In recent years, most indicators of income inequality have stabilised, but remain at high levels. After rising rapidly in the period following economic liberalisation, income inequality in China began to fall in the late 2000s, reflected in a decline in the national Gini coefficient of per capita income. By 2016, the national Gini coefficient had fallen to 0.47, similar to the levels seen in some other emerging market economies like India, as the supply of highly educated people expanded and shortages of unskilled workers began to emerge. During this period, China also witnessed significant reductions in spatial inequalities, with the economies of poorer provinces expanding rapidly. However, spatial inequality remains somewhat higher than in advanced countries, reflecting the persistently vast differences between urban and rural income levels within provinces.