Chinese Economy Full of Promise for Young City Dwellers

by Raksha Arora, Business and Economy Editor

Income gap growing between rural and urban Chinese

At a press conference in Beijing last week, Li Deshui, commissioner of China's National Bureau of Statistics, reported that the Chinese economy grew by 9.5% in 2004. To provide some context, he also mentioned the economy has grown at an average annual rate of 9.4% since market reforms began in 1978.

While some economists might argue that the Chinese economy is overheating, these stellar economic numbers have brought rising incomes and higher standards of living for millions of Chinese households. On the other hand, not all households have benefited equally from this rapid growth, and data from the latest Gallup Poll of China suggest inequalities in income are more entrenched today than at other points over the last decade.

As documented by four administrations of the Gallup Poll of China between 1994 and 2004, the average self-reported household income of Chinese nationwide has climbed impressively from 5,960 RMB in 1994 to 14,700 RMB in 2004. But it's almost entirely the concentration of wealth in urban China that's pulled the average upward: While annual incomes reported by rural households have increased from 4,900 RMB in 1994 to 8,200 RMB in 2004, incomes in urban China have increased far more steeply -- from 9,380 RMB in 1994 to 24,400 RMB in 2004.

In 1997, the average income level in China's three largest cities stood at three times the average rural income, but this gap has been widening progressively. By 1999, Chinese in the top three cities were earning four times the average rural income; in the new poll, respondents in the top three cities earn five times that of respondents in rural households.

Given that rural areas have not been party to the prosperity big cities have seen in recent years, it is understandable that rural residents feel some dissatisfaction with their income levels -- but Chinese in big cities are not extremely happy either. Three in every five rural Chinese (60%) are "somewhat" or "very" dissatisfied with their household incomes, but dissatisfaction with income is nearly as high in urban China, where 55% of residents express some level of dissatisfaction with their level of earnings. This is some testament to the idea that -- as in the United States -- urban Chinese are becoming socially conditioned to feel that no matter what they're earning, they need more to really live well.

Interestingly, income levels do not shift upward with age in China. Those in the 18- to 24-year-old age category have the highest average incomes at 21,200 RMB, and incomes move gradually downward by age from that point on. This is likely attributable to both education and urbanicity: 18- to 29-year-olds are more likely to have attended college than those in any other age group, and those in the youngest age group are the most likely to live in urban areas.

Breaking down the Chinese income numbers by profession, government workers lead the pack with an average income of 29,500 RMB. Business people do just about as well as government workers, with an average income of 29,000 RMB. Farmers have the worst lot with an average income of 6,800 RMB, even less than retirees (13,800 RMB).

Bottom Line

The data confirm the rural-urban income divide not only persists, but has also deepened in recent years. The good news is that young Chinese seem to be surmounting barriers to upward mobility. Income levels are on the rise for the younger generation, particularly for those with college educations.

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