Chinese Reform and Wealth Distribution

Subject: Society

Word count: 1700

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Chinese Reform and Wealth Distribution

 

Although, Urban China has seen enormous growth and development over the last two decades on the economical front, in terms of income and gross domestic product (G.D.P) its urban landscape is still over shadowed, by the tremendous increase in its income inequality and instability of wealth distribution.  The relationship between economic growth and income inequality has been widely researched and still is a lucrative topic for future research and development studies. The research surveys showed that this relationship becomes negative, in developing countries, whilst rich countries show no relationship at all, which brings the assumption that inequality stimulates economic growth, as explained by Risso and Carrerra (2010 cited Forbes 2000). Kanbur and Zhang (2005), state that there have been three peaks of inequality in China in the past fifty years following the Communist Revolution, starting with the great Famine of the late 1950’s, the Cultural Revolution of the late 1960s and 1970s, and lastly, the period of openness and global integration of the 1990s till date.

Econometric investigations prove that, local or regional inequality is explained in the different phases by three key policy variables: the ratio of heavy industry to gross output value, the extent of decentralization, and the measure of openness. They further evaluate this hypothesis and argue that research outcomes suggest that, heavy industry increase inequality due to its rural-urban components, especially prior to 1979.

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