“API Geoeconomic Briefing” is a weekly analysis of significant geopolitical and geoeconomic developments that precede the post-pandemic world. The briefing is written by experts at Asia Pacific Initiative (API) and includes an assessment of burgeoning trends in international politics and economics and the possible impact on Japan’s national interests and strategic response. (Editor-in-chief: Dr. HOSOYA Yuichi, Research Director, API; Professor, Faculty of Law, Keio University; Visiting Fellow, Downing College, University of Cambridge)

This article was posted to the Japan Times on March 15, 2022:

https://www.japantimes.co.jp/opinion/2022/03/15/commentary/world-commentary/china-wealth-gap/

API Geoeconomic Briefing

Photo：Shutterstock

March 15, 2022

China faces mounting challenges amid wealth gap and other social issues

AKO Tomoko
Professor, Graduate School of Arts and Sciences, The University of Tokyo

 

 

 

 

The “Chinese dream” of “great rejuvenation of the Chinese nation” that President Xi Jinping’s administration is striving for means achieving unity between the party, the state and “Chinese people of all ethnic groups” to build a modern socialist country.

This aim obviously includes minority groups, as well as people in Hong Kong, Macao and Taiwan.

As reflected in his speech made in July to mark the 100th anniversary of the founding of the Chinese Communist Party and the historical resolution adopted by the party in November, Xi believes realizing China’s complete reunification under the unity of Chinese people of all ethnic groups is a historic mission.

Against such a backdrop, China’s recent crackdown on Hong Kong and Uyghurs in the Xinjiang region, as well as its goal of bringing Taiwan back into its fold, reflect Xi’s strong determination, but also appear to embody his worries and impatience.

This is because Xi is facing mounting challenges in unifying Chinese people of all ethnic groups, with international criticism rising and social contradictions in the country growing amid slowing economic growth and widening wealth gap.

 

Rising inequality

Income inequality between China’s rich and poor is continuing to grow and is highly likely to remain.

According to Credit Suisse’s Global Wealth Report 2021, 1% of Chinese owned 30.6% of the nation’s wealth in 2020, up from 20.9% in 2000.

On the other hand, Chinese Premier Li Keqiang made a shocking remark at a news conference in May 2020 following the closing session of the National People’s Congress, pointing out that China has 600 million people living on a monthly income of barely 1,000 yuan (¥18,000).

Normally such a wide wealth gap shouldn’t exist in a socialist country, but China has had to pay for pushing ahead with its economic reform and open-door policies to let some people “get rich first,” while suppressing political reforms.

As the country adopted a system in which market competition works only in an incomplete way, people who got rich first by making money in real estate and stock markets continued to become wealthier, making it extremely difficult for the poor to move up the social ladder.

Unfair systems led to serious abuses of power, with opportunities to create wealth concentrated in those with established interests.

In an effort to narrow the gap between its goals and realities, the Xi administration introduced the idea of “common prosperity,” actively working on projects to alleviate poverty and interfering in the real estate market that has been the key driver of soaring inequality.

Not to mention Beijing’s surprising move to prohibit for-profit tutoring services, authorities are taking measures to adjust excessively high incomes by stepping up supervision on illegal money-making activities and encouraging philanthropic donations from rich individuals and high-income companies.

 

Rapidly aging population

However, China’s economic growth is slowing down, and its growth model that relied on real estate development and infrastructure investment came to a crossroads after Beijing began restricting loans to real estate developers in August 2020.

With restrictions imposed to counter the COVID-19 pandemic, domestic demand in the country continues to be weak.

On top of that came the rapid decline in the nation’s birthrate and the aging of its population.

In 2021, the country logged 10.62 million births, a rate of 7.52 per 1,000 people, a record low since Communist-led China was founded in 1949.

China’s total fertility rate — the total number of children that would be born to each woman if she were to live to the end of her child-bearing years — in 2020 was 1.3, lower than 1.34 in Japan. The fertility rate in major cities like Beijing and Shanghai is already the world’s lowest, at around 0.7.

Meanwhile, the population of people age 65 or older topped 200 million in 2021.

To stop the faster-than-expected fall in birthrate and population aging, Beijing announced in May that it would allow couples to have up to three children.

But factors behind the dwindling birthrate include a lack of public pension funds and social welfare programs, gaps between urban and rural areas, and unequal access to jobs and education.

Only a limited number of municipalities and companies have the financial leeway to offer support measures for families raising children.

The recent crackdown on the tutoring industry is apparently intended to reduce pressure on students and parents in the country’s extremely competitive school system, but it is just a makeshift measure that does not solve the problem at all.

Moreover, it is a social norm for people in China to buy a house when they get married, meaning they are laden with housing loans.

China succeeded in slashing its population through sterilization and abortion under its now-abandoned one-child policy, but it would be difficult even for the authoritarian government to achieve the goal of making couples have more children under the three-child policy.

People are reluctant to bear the mounting costs of raising children, and women who value individual rights refuse to be used by authorities for breeding purposes.

In Confucian thinking, child-raising is considered a family business, and such an idea spread deeper in Chinese society with the one-child policy.

Which school children go to, what job they engage in, who they are married to and whether they too have children decide the fate of the entire family.

The one-child policy made two parents and four grandparents pour all their affection, time and money into one child.

 

Side effects of one-child policy

Another serious side effect of the policy was that it created a massive gender imbalance.

According to the seventh national population census conducted in 2020, there were 34.9 million more men than women in China.

The male to female ratio was 105.07 men to 100 women for the overall population, and 107.91 men to 100 women in rural areas.

The sex ratio at birth in 2020 was 111.3 to 100, meaning there were 11.3 more boys for every 100 girls born. The rate dropped from 118.1 in 2010, but remains high.

As for people age between 20 and 40 — considered to be marriage and childbearing ages — there were 17.52 million more men than women, and the male to female ratio was 108.9 to 100.

Such gender imbalance has led to single men being referred to as “shengnan,” meaning “leftover men” in Mandarin.

In some regions, the groom is required to offer a huge amount of caili, or a betrothal gift, in the form of money, a house, a car and other items to the bride’s family. According to Chinese technology giant Tencent Holdings Ltd.’s Guyu Data, the average amount of betrothal money ranked according to province in 2020 was 183,000 yuan (¥3.3 million) in Zhejiang province, followed by 152,000 yuan in Heilongjiang province, 131,000 yuan in Fujian province and 112,000 yuan in Jiangxi province.

The amount is relatively low in metropolitan areas, at 63,000 yuan in Beijing and 72,000 yuan in Shanghai.

Just before the Beijing Winter Olympics opened last month, a video apparently showing a mother of eight being chained up in Jiangsu province sent shockwaves around social media.

While the overall picture of the incident is not yet clear, it is true that recently more women in China have become victims of serious domestic violence and sexual abuse.

Moreover, a great number of children are abducted in China to be sold. In some parts of the country where male chauvinism remains, parents force their daughters to marry for money so they can prepare betrothal money for their sons to get married.

However, more people are beginning to choose different lifestyles.

Many young people are fed up with the so-called 996 culture — working from 9 a.m. to 9 p.m. six days a week — and “neijuan,” a term used to describe the endless cycle of self-flagellation amid unreasonably fierce competition.

Some of them embrace a new concept of “tang ping,” meaning “lying flat” in Mandarin, eschewing interest in social success or materialism.

More people are now choosing to stay single and others are coming out as LGBTQ.

The number of marriage registrations has been on a decline since 2013, reaching a record low of 8.13 million in 2020, down 12.2% from the previous year.

 

Food and energy supplies

What makes the Xi administration worry even more is the unstable supply of food and energy.

One of the concerns is the recent big ups and downs in pork prices.

An outbreak of African swine fever in 2018 forced many pig farmers to give up their business, causing a plunge in pork production. The production volume in 2020 dropped to one third of the 2018 level, raising the price of pork carcasses to record high levels in the 18 months up to the end of 2020.

China’s imports of pork from Western countries led to a rise in global pork prices. But as many pig farming businesses sprang up to benefit from the high prices, production increased in 2021 and prices went down.

A large increase in the number of pigs raised brought about a rise in prices of corn used as feed, which meant pork prices saw a sharp drop while prices for grain were significantly higher.

If China buys too much in fear of supply shortages, prices in the global market rise, but it is not easy to adjust domestic production.

Last year, China increased imports of rice as rice crops suffered damage from floods. Chinese authorities, apparently worried about food shortage risks, adopted a law on food waste in April, banning binge-eating videos and excessive amounts of leftovers.

China imports food from countries like the United States, the Netherlands, Brazil, Germany, France and Canada — countries that maintain a harsh stance on China’s alleged human rights abuses.

In addition, coal and natural gas prices have been posting record highs since late last year.

If tensions in international relations surrounding China continue, it will become difficult for the country to import food and energy, the people’s lifelines.

And if the gap between rich and poor become persistent, it will become harder for people to move up the social ladder.

If young people cannot make use of their talents, they will feel disappointed and disillusioned. Unfair systems prevent the promotion of talented people, and thus hinder economic growth.

The population is rapidly aging and the development model that relies on the real estate sector is no longer functioning.

The one-child policy has had a serious negative impact, with people becoming more inclined to try to get away from the pressures of the family, the state and society.

Food and energy supplies are unstable and global pressure over human rights abuses is picking up.

 

Strengthening propaganda

Amid such circumstances, the government in Beijing is stepping up its propaganda activities.

The campaign includes the “Chinese dream” addressed by Xi, indicating the government’s struggles to unite the Chinese people amid difficulties in reducing economic inequality and guaranteeing equal treatment for all people.

However, in an era in which people are connected through the internet, propaganda efforts that worked in the times of Mao Zedong, when Communist-led China was created, no longer prove effective.

Authorities are only left with the option of strengthening governance and surveillance to put pressure on objections and criticism, but the problem is that it comes with a high cost.

Still, there are people who are generally supportive of propaganda led by the Communist Party and the state — or at least who act supportive although are secretly doubtful — including those who want to hold on to vested interests and those who are influenced by the information control of state media, as well as young cyber-nationalists known as “Xiao Fen Hong” (“Little Pink”).

It is likely that Beijing will enhance its efforts to fuel nationalism as it copes with increasing tensions in international politics and boosts its military capabilities.

If Chinese society becomes more unstable, there will probably be more chances for the Chinese government to try to secure its own legitimacy by blaming Western countries and Japan and maintaining conflict with them.

It is important for Japan’s policymakers, as well as those who are involved in exchange activities or doing business with China, to avoid getting provoked by such moves and think carefully and rationally about how to face the country.

 

Disclaimer: The views expressed in this API Geoeconomic Briefing do not necessarily reflect those of the API, the API Institute of Geoeconomic Studies or any other organizations to which the author belongs