Poorest worse off after economic boom: World Bank
(FT.com)Updated: 2006-11-22 13:56
China's poor grew poorer at a time when the country was growing substantially wealthier, an analysis by World Bank economists has found.
The real income of the poorest 10 per cent of China's 1.3 billion people fell by 2.4 per cent in the two years to 2003, the analysis showed, a period when the economy was growing by nearly 10 per cent a year. Over the same period, the income of China's richest 10 per cent rose by more than 16 per cent.
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"Our analysis suggests that a considerable number of people below the poverty line were hit by an income shock - they only kept up consumption by spending their savings."
The findings challenge the basis of government policies aimed at narrowing the country's politically sensitive wealth gap.
Hu Jintao, China's president, who came to power in 2002 and is likely to win a second five-year term next year, has made narrowing the gap between rich and poor a centrepiece of his administration's economic policies.
China, which had relatively even income distribution in 1980 when it embarked on market reforms, is now "less equal" than the US and Russia, using the Gini co-efficient, a standard measure of income disparities.
But the way to close this gap has been the subject of an intense and highly politicised debate in China, with many arguing that economic growth alone was the best way of addressing poverty, even if the results were uneven.
The bank's finding was "very significant" in this respect, said Arthur Kroeber, of Dragonomics, a consultancy, in Beijing, as it shows that the argument that a "rising tide lifts all boats" was wrong. "If there is evidence that some people are worse off in absolute terms, then that will be an issue of concern for the government," he said.
The fall in income for the poor cannot be explained by declining farm
incomes, as food prices were rising at a faster rate than urban prices in
December 2003.
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