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'Income Inequality and the Implications for China’s Global Economic Development'.

'Income Inequality and the Implications for China’s Global Economic Development'.

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An essay for the 2011 Undergraduate Awards Competition by Brian Foody. Originally submitted for HS-28 Emerging markets at University of Limerick, with lecturer Dr. Anthony D'Costa in the category of Business & Economics
An essay for the 2011 Undergraduate Awards Competition by Brian Foody. Originally submitted for HS-28 Emerging markets at University of Limerick, with lecturer Dr. Anthony D'Costa in the category of Business & Economics

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Published by: Undergraduate Awards on Aug 29, 2012
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05/13/2014

 
 
Income Inequality and the Implications for
China‟s Global
Economic Development
Spring Semester 2010Class: HS-28
Emerging markets-Societies in Transition
 
 
 
Introduction
Since China‟s economic reforms and opening up to world trade in 1978
, it has seen a tenfoldincrease in its GDP, sustained economic growth over the last three decades and perhaps mostimpressively, alleviated over 600 million people from abject poverty in a single generation.
1
Nomean feat for a country that, it is estimated by the World Bank, had some 64% of its peopleliving below a poverty line of $1.25 per day (PPP), prior to the reforms. That figure had declinedto 10% in 2004.
2
 However, although huge strides have been made in the reduction of poverty, inequality has risendramatically during the same period. The disparity between: rural and urban incomes, pay of skilled and unskilled workers in urban areas, migratory controls and a lack of educationalopportunities are widely attributed to the cause of this inequity. The Gini co-efficient, of thisonce ideological egalitarian society, was 41.5 in 2007
3
and has continued to rise, making Chinaamong the most unequal societies in the world.In this paper I outline why inequality is happening, how serious it may be and the implicationsthis may have for China in its efforts to establish itself as a major world capitalist player. Inparticular the paper will focus on the unbalanced growth of the Chinese economy and explainwhy income inequality may not be such a serious problem, as is widely reported. It does howeverpoint to the need for an increase in opportunities, investment and favorable economic policy in
1
"News & Broadcast - Results Profile: China Poverty Reduction."
The World Bank 
. N.p., n.d. Web. 14 June 2010.<http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22508750~menuPK:141311~pagePK:34370~piPK:34424~theSitePK:4607,00.html>.
2
"News & Broadcast - Results Profile: China Poverty Reduction."
The World Bank 
. N.p., n.d. Web. 14 June 2010.<http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22508750~menuPK:141311~pagePK:34370~piPK:34424~theSitePK:4607,00.html>.
3
"World Factbook."
CIA
. N.p., n.d. Web. 14 June 2010. < https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html>.
 
 
order to tackle underprivileged areas. The long term implications for China as a global capitalistplayer are addressed and the paper suggests that China will continue to grow in this regard, butan increased focus on domestic consumption, job creation, education and growth of a largermiddle class is vital in order to sustain development.
Methodology
The paper will draw on relevant data and analytical research from various sources such as theWorld Bank, national bureau of statistics, the OECD and other credible statistical sources.Academic papers provided by the course will also be used in my analysis, along with otherrelevant papers which I have analyzed.The paper will try to draw on the latest information available, regarding Chinese economicpolicy and refer to the roles institutions have played in development of the economy.
Let some get rich first 
 
In the early 1980‟s the Chinese government began to open up the first of its special economic
zones, areas which would allow for trade with the outside world, concentrated technological andinfrastructural development and favorable economic policy. These zones were predominately
created on China‟s eastern coastline, in areas such as Hainan, Shenzhen, Zhuhai, Xiamen in
Fujian province and Shantou in Guangdong province. Mass employment opportunities werecreated and people working in these zones saw a huge increase in their disposable income. In

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