China’s rich are richer than you think, and the poor are less frugal
China’s official statistics tell a story of the rich getting richer and the poor getting, relatively, poorer. The official data suggests that the richest 10% of the population have earnings 9 times those of the poorest.
But according to Professor Wang Xiaolu, that’s just the half of it. Professor Wang’s original research in 2005, suggested that the richest 10% of the population had an average disposable income of CNY96,000/year, several times higher than the CNY28,000 suggested by the official statistics. Professor Wang believes that the reason for the massive gap between official and real income for China’s rich is that the extra earnings are the proceeds of corruption, and are therefore unlikely to be reported.
According to the most recent posting on his blog, Professor Wang has now updated his research, and found much the same thing. The ratio between the income of the richest and the poorest 10% of the population is not 9, as suggested by the official National Bureau of Statistics numbers, but rather 21. Professor Wang notes that this massive disparity will likely have serious implications for social stability, and also strip away public support for economic reforms - which are perceived as disproportionately benefiting the rich.
In an intriguing side note, Professor Wang notes that the massive income of the very rich also helps explain the rapid growth in China’s household deposits. This puts a new spin on the idea of China’s households as frugal savers. If Prof Wang is correct, China’s very high household savings rate does not reflect poor and middle income households saving carefully for their future, it reflects a few very rich households parking their ill-gotten gains in the banking sector before buying a yacht.
You can see Professor Wang’s blog posting here.