The gap between China's rich and poor is growing, which spells trouble when 300 million live below the poverty line

Photo by China Photos/Getty Images

While China’s economic growth may have exceeded market expectations in the June quarter, there are growing concerns that the country’s goal-orientated growth target is merely exacerbating the divide between the rich and poor, according to a report from China’s People’s Daily.

Debate on the subject came to the fore over the weekend when China’s vice finance minister, Zhu Guangyao, said China’s GDP will reach 100 trillion yuan ($16.11 trillion) by 2020, taking China’s per capita GDP to $10,000, up from $7,485 in 2014.

The continued focus on specific numeric targets has some worried that it will merely benefit China’s rich, rather than the lower and middle class.

China’s Gini coefficient, a gauge of economic inequality based on the income distribution of a nation’s residents, has grown sharply over the past two decades, reaching 0.469 in 2014, the report says, citing data from China’s statistics bureau.

The gauge has now slipped for six consecutive years, indicating that the divide between rich and poor is growing. Yu Pingkang, chief macroeconomic analyst at Huatai Securities, believes the government needs to do more ensure the gap doesn’t continue to grow.

“Authorities should accelerate reforms in wealth redistribution, such as salary cuts among senior executives of State-owned enterprises and the reform of the country’s pension system to allow society to equally enjoy the benefits of economic development”, said Yu.

Last year, Wei Shangjin, chief economist of the Asian Development Bank, suggested around 30% of China’s 1.35 billion population currently lived below the poverty line. Given the implications for social stability should the divide continue to grow, reforms to spread the prosperity of rapid economic growth will need to be a priority for the government in the years ahead.

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