A new research paper from celebrated French economist Thomas Piketty indicates that China’s breakneck growth over the past three decades has also led to skyrocketing levels of inequality, while a great deal of national wealth remained concentrated in government hands.
The paper published by the National Bureau of Economic Research provides a more dire picture of inequality in China than the Chinese government’s own official inequality figures would depict.
It concludes that the top 10% income share in China increased from 27% to 41% during the period from 1978 and 2015, while during the same period the share of national income enjoyed by the bottom 50% almost halved from 27% to 15%.
Piketty, the renowned author of Capital in the Twenty First Century and professor at the University of California at Berkeley, worked with two other researchers to compile “national accounts, survey, wealth and fiscal data (including recently released tax data on high-income taxpayers) on the accumulation and distribution of income and wealth in China over the 1978 – 2015 period.”
The paper concludes that while wealth inequality used to be lower lower in China than anywhere else in the world, it’s now perched in between Europe and the US.
Piketty notes that despite efforts to advance privatisation of since Deng Xiaoping’s launch of reforms, the China remains a curious beast amongst major economies with “a property regime… still very different than in other parts of the world.”
In developed economies the share of public property in national wealth has declined from 15 – 25% during the 1960’s – 70’s to nearly zero at present.
In US, UK , Japan and Italy, where public debt exceeds public assets, the public property share of national wealth is negative, while in Germany and France it hovers just above zero.
This means that these developed economies have transitioned towards a highly privatised economic model over the past half century.
In China, however, the share of public property in national wealth remains at around 30% with no signs of diminution over the past decade.
“If anything, the public share in China’s mixed economy seems to have strengthened since the 2008 financial crises, while it has dropped again in rich countries,” writes Piketty.
“China has ceased to be communist, but it is not entirely capitalist; it should rather be viewed as a ‘mixed economy’ with a strong public ownership component.”