by Stella Yifan Zee | UPDATED Nov 14, 2021 01:45 PM EST
As the economy matures, children from the wealthy and politically connected elite have more opportunities
China’s phenomenal economic growth has fueled the country’s belief that one can succeed if one works hard – a key component of Xi Jinping’s “China Dream”.
However, for more and more Chinese people, this is no longer true.
Academic research and data shows that as China’s economy matures, so are the best opportunities for children from the wealthy and politically connected elite. Children from poor or rural families are finding it difficult to move forward.
An influential paper by scholars from the National University of Singapore and the Chinese University of Hong Kong found that children born in families at the bottom of Chinese society in the 1980s were more likely to move over time than those born in the 1970s. was less than What the authors called “a growing inter-generational poverty trap”.
World Bank economists came to a similar conclusion, with mobility in China falling especially among women and in poorer sectors.
This problem is partly a sign of China’s success in lifting millions out of poverty through rapid industrialization and wealth creation. As its economy has grown into the world’s second largest, it has begun to present some of the problems that can be found in mature Western economies, where incomes have stagnated, especially at the lower end. One difference is that this is happening earlier in China’s development.
As relative mobility has declined, inequality has worsened. In 1978, China’s top 10% earners and the bottom 50% each took home about a quarter of the country’s total income. According to World Bank data, as of 2018, the top 10% earned more than 40% of total income in China, while the bottom half received less than 15%.
In 2020, the top 1% of individuals owned about 30% of China’s wealth, up 10 percentage points from 2000. In the US, the share of wealth controlled by the top 1% rose just 2.5 percentage points to 35% during the same period. According to Credit Suisse Group AG.
The pandemic has widened China’s economic divide. China minted more than half the world’s new billionaires last year, overtaking the US as the first country with more than 1,000, according to the Shanghai-based research firm Hurun Report. Yet more than 600 million Chinese people—more than 40% of the population—live on an average monthly income of less than $140, Premier Li Keqiang said last year. This was about $40 less than the average amount spent each month by those living in rural China in 2020.
Concern over the incident is driving many of Mr. Xi’s priorities, including the Beijing-led war on poverty in rural areas; crackdown on technology giants, on whom the state is responsible for workers’ exploitation and other problems; aggressive asset-market interventions to control price increases; And a recent move against companies offering tuition after school, which Beijing believes is widening gaps in educational opportunities.
“China has shifted its policy priority to rebalancing economic benefits for workers and the general public,” said Robin Jing, chief China economist at Morgan Stanley in Hong Kong.
Total income and living standards continue to rise in China. Most residents of rural China now have TVs. More than 70% of the population has internet access, up from 29% a decade ago. China’s official Gini coefficient, a measure of income inequality, fell slightly from 0.47 in 2020 to 0.47 in 2008, partly because of Mr. Xi’s campaign against extreme poverty in recent years. However, the reading is still above 0.4, a threshold set by the United Nations that indicates a large income gap.
Nevertheless, the phenomenon of declining relative social mobility, which risks ruining human potential and hindering economic development in any society, is a particular problem for Beijing because it contradicts the communist ideal of breaking down class distinctions. Is. Chinese leaders fear it could threaten social and political stability.
Disillusionment has spread among Chinese youth, who are vocal about limited upward mobility and working long hours. A new catchphrase—“to lie down”—has gone viral as a way to describe the resignation feelings of young people and their refusal to pursue work they suspect will move on.
“I’m less optimistic about my future,” said 23-year-old Long Lin, who grew up in southwestern Guizhou, one of China’s poorest regions. The first in his family to attend college, he now earns $1,080 a month in China. That’s nowhere near enough to buy an apartment and get married someday, he says, in the coastal city of Ningbo, working for a quality-control company.
“It was not easy for my parents to send me to college. However, now it seems almost impossible for me to climb the social ladder.”
In a study published last year, researchers including Harvard University sociologist Ya-Wen Lei found that intolerance to inequality among Chinese people is increasing as their economic expectations rise.
Historically, rapid industrialization often led to higher social mobility, at least initially. The addition of new factory jobs creates opportunities for the poor, helping them climb the social ladder. This happened in places like South Korea in the 1970s.
Gains can stall or reverse later, as countries get richer. Policy choices, such as how much emphasis leaders place on education and healthcare, and how they tax wealth, can have an impact.
In the US, relative social mobility declined sharply in the first half of the 20th century, as the country urbanized not all places benefited equally from economic growth and public education. Mobility improved to some extent, as access to education expanded.
In China, after assuming power in 1949, the Communist Party tried to eliminate class distinctions by eliminating large-scale private ownership. Later, in the midst of turmoil, including the Cultural Revolution, it provided more favorable access to educational resources to the offspring of farmers and workers.
Those efforts made society more equal – at a serious cost: overly vigorous political moves led to serious mismanagement of the economy. Millions of people died of starvation in the early 1960s. The Cultural Revolution, which lasted for decades until 1976, sent millions of urban youth into the countryside and plunged into even greater poverty, leaving China far behind wealthy countries.
With market-oriented economic reforms in the late 1970s, many of the benefits initially went to the poor. Rural migrants moved to cities where they earned more and were on the cusp of China’s boom. Rags-to-riches stories were common.
Chinese people who reached adulthood between the 1950s and 1990s mostly experienced a “rising tide that lifts all boats,” said Jiang Zhou, an associate professor of sociology at Harvard University.
But as China’s economy matured and grew at a slower pace, he and others say, greater gains from its opening are well linked. The emerging private sector allowed the administrative elite to accumulate wealth through political clout and social networks. Many Chinese government officials became entrepreneurs themselves.
The paper, published in 2019 by researchers from the National University of Singapore and the Chinese University of Hong Kong, found that only 7.3 of children born between 1981 and 1988 whose parents were in the bottom 20% of China’s economic pyramid Only % could climb up. Top 20% of society.
A comparable group of children born between 1970 and 1980 had a 9.8% chance of growing into the top 20% – a difference of millions.
The rise of China’s tech industry created fortunes for people like Jack Ma, founder of e-commerce giant Alibaba Group Holding Ltd., and other early shareholders. It also created millions of jobs.
Now, rank-and-file employees complain that they are often required to work six days a week or more from 9 a.m. to 9 p.m., a lifestyle known as “996.” Without much hope of becoming. Popular outrage about tech tycoon wealth is widening
At least two other major factors are fueling discontent.
Ever since China began allowing private homeownership, the rise in property values has created a huge pool of money for those who initially shopped, which helped them buy more. While China has one of the highest homeownership rates in the world of over 90%, those who don’t come early – including small families starting now – feel the price.
As of this June, the median home value was about 25 times the average annual household disposable income in Beijing and 20 times that in Shanghai, according to calculations by real estate brokerage firm Colliers International Group Inc. In comparison, the ratio was less than 8. About 7 times in London and in New York City.
Zhang Hang, 25, says he hasn’t earned enough to buy a place of his own in Beijing, despite a lot of help from his parents. Prices for small two-bedroom apartments often exceed $900,000, says Mr. Zhang, who works for a state-owned company, and banks often demand large down payments.
“I’m not sure whether Beijing can provide more opportunities for my career, but what I’m certain now is that the pressure to buy a home and raise children is going to be enormous in the future,” he said. Definitely not my ideal way of life.”
Another reason is inequality in education. According to AXA Investment Managers, the average household in some top-tier cities spends as much as one-quarter of their take-home salary on tuition.
Rural students do not have such opportunities. About 22% of students enrolled in China’s prestigious Tsinghua University in 1990 were from rural China, but as of 2016 the percentage was 10.2%. While there have been some changes in China’s urbanization, researchers say that the country has not urbanized so quickly to explain such dramatic changes.
Jiang Xuanang, the top scorer in China’s national college entrance exam in 2017, struck a nerve across the country when he said his success was largely the result of the privileged upbringing by his parents, both diplomats, as well as educational resources. Beijing offers.
“Many children from outside Beijing or rural areas will never be able to enjoy those resources. That means I actually had many shortcuts compared to them when it comes to studies,” he said in a media interview at the time.
University researcher Luo Jiangyu, 35, originally from rural Chongqing, says she makes a good living in Chengdu, where her 5-year-old son is enrolled in a local public primary school.
He doesn’t have the time or money to invest much in his education, which he fears will hold him back compared to children from wealthy families.
“Every day my faith in merit is breaking down because I see rich people dedicating so many resources to the next generation,” she said.
Chinese leaders have responded with a spinning series of policies aimed at allaying concerns.
To keep a lid on the cost of real estate, officials have asked banks to curb lending to developers and in some cases even set maximum “guidance” prices on properties for banks while approving mortgage loans. .
In July, officials banned school education service producers from making a profit or going public, even as a move was made to level the educational playground.
Officials are pushing other ideas, including a pilot project in Zhejiang province aimed at bridging the gap between rich and poor by “extremely high incomes”, cracking down on illegal profits and encouraging philanthropy.
Ms. Luo, a researcher at Chengdu University, remains concerned. She says her friends often repeat a popular phrase: “Poor families can hardly raise rich sons.”
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