ADB warns on rising inequality in China

China and Nepal have the largest rich-poor gaps in Asia following a decade in which income distribution in the region has become increasingly skewed in favour of the rich, according to a new study by the Asian Development Bank.

As well as having the highest Gini co-efficient, a standard measure of income disparities, the ADB study found spending by the wealthiest 20 per cent compared to the bottom quintile of the population in China has been increasing the fastest of any Asian country.

A majority of the 22 developing countries in the study, ranging from central Asia to Indonesia in south-east Asia, registered increases in inequality over the last decade, as measured by the Gini co-efficient.

The study provides stark confirmation that high-speed growth in Asia in recent years is producing different outcomes than in the region’s development pioneers, Japan, South Korea and Taiwan, where incomes were much more evenly spread.

“It is not so much a case of the rich getting richer and the poor getting poorer, but that the rich are getting richer faster than the poor,” said Ifzal Ali, the chief economist of the ADB’s research department, at a press conference in Beijing.

Dr Ali said growing inequality could in some countries lead to greater social conflict, “from street demonstrations to violent civil wars.”

“There is a direct correlation between rising inequality in Nepal and conflicts in some of its provinces,” he said.

Using other measures besides income, such as education, health and land ownership, countries like India and Pakistan fare much worse.

Neither country rates high in terms of the Gini coefficient, but they record very high inequalities when using the benchmarks of health and land.

Dr Ali said that India’s ratings for infant mortality, child nutrition and primary schooling “had deteriorated today to be worse than Bangladesh.”

China’s exceptionally high economic growth rates meant that even though its income distribution has become more unequal than India in recent years, its poorest citizens have far more money to spend.

The report does not single out any one factor driving rising inequalities, but says it is occurring for different reasons across regions, sectors and households.

While the report does offer some policy ideas to alleviate the problems, it also concedes that the forces of globalisation, which favours coastal cities hooked into world trade and educated, English-speaking people, do mean that some inequality may be inevitable.