The World Bank defines poverty as a country with a PER capita GDP of $10, 000 whose citizens live on less than $5.50 a day. By that measure, more than 40% of China’s population lives in poverty. The picture shows migrant residents scavenging waste by the railway in Wuhan to make a living.
The Chinese communist Party has vowed to reach the goal of eradicating poverty by 2020. But by World Bank standards, more than 40 per cent of China’s population still lives in poverty. The annual report from Shanghai University of Finance and Economics also shows a worsening gap between rich and poor in China. The Communist Party wants the economy to focus on domestic consumption in 2021, and without a developed middle-income class, demand is unlikely to boost much.
The “Annual Report on China’s Macroeconomic Situation Analysis and Forecasts” released by the Institute of Advanced Studies at Shanghai University of Finance and Economics highlights the growing gap between rich and poor: The poorest 20% of China’s population, about 280 million people, now account for only 4.7% of income or consumption. The richest 20 per cent of the population account for as much as 50 per cent of income or consumption.
When the People’s Bank of China surveyed the proportion of net assets of Chinese households in 2019, it found that the top 20 percent of households owned 65 percent of the country’s net assets, 10 percent of households owned 49 percent and 1 percent of households owned 17 percent.
Even though China’s GDP is now the second largest in the world, with a per capita GDP of more than $10,000, the gap between the rich and the poor is still serious in terms of median value.
According to the World Bank, a country with a GDP per capita of $10,000 is considered poor if its citizens live on less than $5.50 a day. By that measure, more than 40% of China’s population lives in poverty.
In May 2020, Chinese Communist Party Premier Li Keqiang said that 600 million people in China earned less than 1,000 yuan a month, sparking fierce debate about the gap between rich and poor. More than 40 per cent of China’s 1.4bn people earn less than $5 a day.
A survey released by Beijing Normal University in June of the same year also found that there are about 600 million people in China with a monthly income of less than 1,000 yuan, accounting for 42.85 percent of the total population. Of these, 220 million have a monthly income of less than 500 yuan and 5.46 million have no income at all.
Beijing is hoping to boost domestic consumer demand to boost economic growth. The first meeting, chaired by The communist Party’s new commerce minister, Wang Wentao, in early December reaffirmed the central government’s economic focus on domestic consumption in 2021, calling it a key element of the double cycle.
Yet the spending power of the Chinese masses is questionable.
According to the “Survey on The State of Leisure in China (2020)” jointly released by the Chinese Academy of Social Sciences, 44.5 percent of respondents spend less than 1,000 yuan per year on leisure and recreation, or 83 yuan per month. That’s the equivalent of 680 million people; More than 57 million people, or 4.1 percent of the population, spent no leisure time at all.
Among the high-end consumers, 213 million people (15.2%) spent more than 10,000 yuan on leisure, 47.6 million of them (3.4%) spent more than 40,000 yuan.
China’s high concentration of assets in a small number of households explains why luxury goods and car sales boomed in the second half of 2020, while the overall consumer market was unusually sluggish.
The Shanghai University of Finance and Economics said that without a developed middle income class, demand will not be boosted significantly if the problem of wide income gap is not solved.
Chinese households are heavily indebted, which is also one of the main reasons for weak consumer spending. The university of Finance and Economics report notes that the household leverage ratio — the level of debt — has risen to 64.1 percent. Adding in hidden debt, such as borrowing from non-bank institutions, China’s household leverage ratio reached 82.5% in the first half of 2020, the Financial Times previously reported.
Separately, the Chinese Communist Party recently declared victory in its fight against poverty. However, according to the 2019 definition by the Communist Party of China and The State Council, poverty alleviation is defined as an annual income of 4,000 yuan, equivalent to 333 yuan per month, which is equivalent to the extreme poverty level set by the United Nations.
Some scholars have commented that the Communist Party’s campaign to achieve poverty alleviation targets is nothing more than a political necessity. It is both an external publicity for The Chinese model of poverty alleviation and a propaganda tool to maintain political stability.
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