China's economy is becoming more like America’s — and not in a good way
Business Insider
Published Jun 06, 2017 08:16AM ET
Updated Jun 06, 2017 09:16AM ET
China’s three-decade economic boom, marked by gravity-defying double-digit growth rates, has been accompanied by a sharp increase in income inequality, according to a new study from French economist Thomas Piketty.
"China’s inequality levels used to be close to Nordic countries and are now approaching US levels," writes Piketty, a professor at the University of California at Berkeley, alongside two co-authors in a new paper published by the National Bureau of Economic Research.
The authors compile "national accounts, survey, wealth and fiscal data (including recently released tax data on high-income taxpayers) in order to provide consistent series on the accumulation and distribution of income and wealth in China over the 1978-2015 period," the paper says.
That’s no small feat in a country where most economists don’t even trust more prominent economic indicators like gross domestic product. Inequality data are generally harder to come by, and Piketty stresses his efforts are preliminary.
Still, the findings are startling:
"We provide sharp upward revision of official inequality estimates," says Piketty. "The top 10% income share rose from 27% to 41% of national income between 1978 and 2015, while the bottom 50% share dropped from 27% to 15%."
They add: "Regarding wealth inequality, we have the same basic finding as for income inequality: wealth inequality used to be lower in China than everywhere else, and it is now intermediate between Europe and the USA."
China has taken many steps towards private industry during the period from 1978-2015, "but the property regime of the country is still very different than in other parts of the world," writes Piketty. The French economist is most famous for his book "Capital in the 21st Century," which is highly critical of what he sees as unproductive wealth accumulation in wealthy nations that he believes should be taxed at higher rates.
In most developed countries, the share of public property in national wealth used to be around 15-25% in the 1960s-1970s, and is now close to 0%, Piketty says. It has even recently become negative for the United States, Britain, Japan and Italy (meaning public debt exceeds public assets) and is just barely positive for Germany and France. This means the West has essentially moved away from a model of public-ownership of the economy to a more fully privatized market model.
Get The News You Want
In China, however, the share of public property is in the 30% range.
"To put it differently: China has ceased to be communist, but is not entirely capitalist; it should rather be viewed as a ‘mixed economy’ with a strong public ownership component," Piketty concludes. "If anything, the public share in China’s mixed economy seems to have strengthened since the 2008 financial crises, while it has dropped again in rich countries."
Written By: Business Insider
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.