Dateline: Beijing

Last week I promised to look at equality in China.

First, there is the stunning fact that over 200 million people have been lifted out of absolute poverty in recent decades. China is now the world’s third largest economy, yet its citizens have a per capita income of US$3,100. This is one tenth of ours - US$31,000. They are 104 in the league table; we are 28. But the Chinese have been getting wealthier year on year, as their economic growth rate has been stratospheric.

This year China is aiming for a ‘recessionary’ growth rate of 8%! In the months since the global recession hit, 20 million jobs of rural migrant workers have gone in the export factories as orders to the US, European and other shops and factories have dived. But China has not been as hard hit as Japan or the other Asian ‘tiger’ economies.

As recently as 1990, three quarters of the Chinese population lived in the countryside. Now it is down to around half. In the US the rural population is only 7%. The government is pursuing a broad strategy of moving people to urban areas as a means of increasing incomes. However, special measures have now to be put in place to help migrant workers returning to their villages to set up small businesses.

The National People’s Congress, which meets annually in March has just ratified the government’s proposal to spend 4 trillion RMB or US$ 586 billion on the economic stimulus package. More money is available if need be, says Premier Wen Jiabao. Expenditures are already flowing through via construction and infrastructure projects into the industrial economy. Some imports from Western countries are on the rise again, which is important for New Zealand, as exports to China are now substantial.

The government is making efforts, too, to persuade the Chinese, who are great savers, to spend more of their cash. A large chunk of the $586 bn is going into the health and social security systems, which are underfunded. Perhaps the most worrying aspect for China is their huge holding of US government debt. If the US struggles economically, China cannot escape. So while China is in a better position than most large economies, there remains a vast gulf between rural and urban living standards.