Rich-poor divide in China surpasses US: Study

Income gap between the rich and the poor in Communist China has surpassed that of the US by a big margin, a new study said, warning of increased social unrest as the growth slowed in the world's second largest economy.
Although the government has shown it is serious in dealing with the issue, observers warn the severe inequality is undermining China's economic development and risks triggering more social unrest, a study by Xie Yu and Zhou Xiang, scholars at the University of Michigan in the US, said.
The study said China's Gini coefficient -- a gauge of income gap -- has reached very high levels in the range of 0.53-0.55. In 2010, the Gini coefficient was about 0.55, while the figure in the US was 0.45.

A reading above 0.4 usually marks strong inequality, which could be an indicator of social unrest.
However, China's official Gini coefficient was 0.481 in 2010, already higher than the US level, according to the National Bureau of Statistics (NBS).
Most experts agree that China's Gini coefficient is about 0.5, Li Shi, director of the Institute for Income Distribution and Poverty Studies at Beijing Normal University, told state- run Global Times.

Experts say while Africa and Latin America have the highest level of income disparity, China's Gini coefficient is among the highest in Asia, the newspaper said.
Economists believe the severe income inequality, among the highest in the world, is taking a toll on the Chinese economy, which has been experiencing slower growth.

Wang Xiaolu, an economist at the Beijing-based China Reform Foundation said that data in the past three decades showed whenever the Gini coefficient rises by 0.01 point, the savings rate climbs by 0.76 percentage points.
Zhuang Jian, an economist at the Asian Development Banks said that the income disparity goes against China's efforts to shift its economic growth model to a consumption-driven one.
"The rich use the majority of their wealth for investment, and only a limited proportion for consumption. This is not conducive to the expansion of consumption if a large amount of wealth is in the hands of only a small number of people," Zhuang said.