China's income gap widens as economy slows

The Associated Press

Published: January 16, 2009

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SHANGHAI, China: The long-standing, politically sensitive wealth gap between China's citydwellers and its farmers is widening as the economy slows, foiling pledges by its communist leaders to help the countryside catch up.

Factories have closed, forcing millions of migrant workers to return to their rural families who depend on their incomes. The reduced purchasing power in the countryside could also hinder efforts to counter a recession by boosting domestic consumer spending.

Agriculture Ministry statistics show the gap between average urban and rural incomes expanded to 11,100 yuan (about $1,600) in 2008, with the ratio between the richer city residents to those in the countryside rising to 3.36 to 1, the state-run newspaper China Business News reported Friday.

The ratio was 3.33 to 1 in 2007, with the gap then at 9,646 yuan (about $1,400).

China's stunning economic boom was fueled largely by its huge pool of inexpensive migrant labor. Though factory wages were rising before plunging demand caused exports to slump last fall, villages still lag far behind the cities.

That disparity is what brings farmers like Gan Qiang, a 36-year-old courier from a village outside Beijing, to a city like Shanghai.

"It's much tougher making a living in my hometown. You can't just rely on planting crops," Gan said as he stood outside a subway station on a busy downtown shopping street.

"Here at least I don't have to worry about the damned weather. I just wait at the subway station and fetch things for people," he said.

With a population of 1.3 billion, China has far more people than jobs to be filled. But legions of farmers like Gan have found work in city factories and construction sites, or as peddlers, deliverymen, recyclers and domestic helpers.

Incomes in Shanghai and some other big cities are about a third higher than the average annual urban income, which was 15,800 yuan ($2,300) in 2008, Chen Xiwen, a top rural planning official, reported at a conference last week in Beijing. The average rural income was 4,700 yuan (about $690).

In developing countries like China, such inequalities are not uncommon.

But China's urban incomes have increased much more quickly, with average annual income jumping 74 percent since 2003, while rural incomes rose only 31 percent. And many of the migrant workers now heading back to their hometowns for the Lunar New Year holiday that begins Jan. 25 will have no jobs to return to.

The huge divide in Chinese living standards is apparent in the armies of humbly dressed men and women hauling carts piled with boxes, discarded appliances and other scrap for recycling through city streets.

It is also seen in the beggars prowling city subway lines and street corners, and in the rundown ghettos and shantytowns in and around city suburbs.

Liu Zhuang, a farmer from eastern China's Shandong who was selling cherries outside a Shanghai shopping mall Friday, said it was worth dodging the police patrols to make a living.

"I make twice what I do back home, and I need the money," he said. "People working in the big city can easily afford to pay for this kind of expensive fruit."

Layoffs and sudden factory closures have provoked protests in some regions, accentuating worries over the threat to social stability and prompting government calls for companies to avoid job cuts.

"Social instability is clearly an issue," James McCormack, head of sovereign ratings in Asia for Fitch Ratings, said in a conference call Friday, citing the lack of data about migrant labor and layoffs as another concern.

So far, anger over layoffs seems aimed mainly at employers, but there are risks of wider problems.

"We are concerned about what we don't know in China and the migrants are something that we don't know," he said.

China's top leaders have made boosting farmers' incomes a top political priority. Members of a top-level government advisory group are proposing an increase in the basic purchasing price for rice, the income from which many farmers rely upon, to help narrow the gap, the China Business News report said.

Among other measures, leaders have promised subsidies for farmers' purchases of appliances and cars, slashed fuel prices and pledged to improve social services such as health insurance and schooling.

A 4 trillion yuan ($586 billion) stimulus package announced in November is aimed at creating jobs to replace some of those lost in the slowdown, but economists say it is unclear how many new jobs will be created.

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Associated Press researcher Ji Chen contributed to this report.