The great Chinese inequality turnaround

Working Paper 2017-433

Abstract

The high inequality in China has been a focus of interest for policy makers and researchers. However limited work has been done to evaluate its latest trend since 2010. With the change of the economic structure and new policy tools carried out recent years, a revisit of the Chinese inequality should give us the latest information about its evolution and the impacts on income distribution of these economic and policy changes. This paper argues that after a quarter century of sharp and sustained increase, Chinese inequality is now plateauing and even turning down. The argument is made using a range of data sources and a range of measures and perspectives on inequality. The evolution of inequality is further examined through decomposition by income source and population subgroups. Preliminary explanations are provided for these trends in terms of shifts in policy and structural transformation of the Chinese economy. The narrative on Chinese inequality now needs to focus on the reasons for this great turnaround.

Authors: Ravi Kanbur, Yue Wang, Xiaobo Zhang.