Globalization and Inequality.docxVIP

Globalization and Inequality – A Case of ChinaIntroductionAfter the reforms in 1978, China experienced rapid economic growth, which remarkably increased the living standard of people. However, the growth was highly skewed and not shared equally across the country. In general, the western and middle China areas had fallen behind the eastern China; and the rural areas grew slower than cities. According to the data from China Household Finance Survey (CHFS), the overall GINI coefficient is 0.61 which is considered as a very high level comparing to the world average level 0.44 in 2010. More specifically, east area of China, the highest income area, has the highest inequality level 0.60, follows by the middle area and the west area’s GINI coefficient is relatively lower. Table 1 shows the GINI coefficient in China, and Table 2 shows the productivity difference in China.Table 1: The rural/urban inequality and between area inequality in China. (2010)OverallUrbanRuralGINI Coefficient0.610.580.61EastMidWestGINI Coefficient0.600.560.51Source：CHFS 2011.Table 2: Chinese GDP per capita in USD 2010 by area.Source：China Statistical Yearbook 2010.Cause of Inequality2.1 decomposition of income and GINI coefficientTable 3 shows the Income’s contribution to GINI coefficient, and it shows that the income inequality of China majorly due to salaries, business income and transfer whose contribution to GINI coefficient is 39.6%, 30.9% and 17.8% respectively. Those sectors whose ratio to the total is larger than the contribution to GINI coefficient, are causing inequality. On the contrary, if whose ratio to the total is smaller, that income improve equality. According to the table, salary, business income and investment income deteriorate inequality; agriculture income and transfer income improve equality. Especially, for rural households agriculture income accounts for 26% of their total income while only contributing to GINI by 21%. Thus improving agriculture income can improve equality.T