推动“新城镇化”的巨额资金从何来？
By He Qinglian on February 4, 2013.
Following the emergence of the new industrial zone of Tijuana, Mexico, Beijing has finally realized that “the factory of the world” will relocate elsewhere and it has to find a new supporting point for economic development. Judging from incoming Premier Li Keqiang's speeches on economic development in the last six months, “new urbanization” will be the core of China's economic development from now on.
In fact, the so-called “new urbanization” derives essentially from the same mindset of “using real property (as an engine) to drive economic growth”, only that something new is added. For example, social policies like the probability that individuals of rural registered household could adopt an urban one.
But I think that the registered household policy could only address the problem of discrimination against people from rural background, it is of little significance to the urbanization success and economic sustainability in China.
The problems of new urbanization are as follows: 1) where do the huge funds required to promote the new urbanization come from? 2) who will be the genuine purchasers of these real estate? 3) with urbanization driven by policy, where do the job opportunities for the new urban population come from? 4) and how to solve the conflicts caused by the land acquisition of the rural population?
This article will analyze the first two questions.
First, who would inject the funds needed for “new urbanization”?
The urbanization of developing countries is generally an outcome shaped jointly by the rise or shift of industries and government policy, with diverse sources of funds. This was the case in the Pearl River Delta and the Yangtze River Delta years ago. At that time, various enterprise-based community funds came together to compete projects, be it the construction of industrial zones, living facilities, or logistics infrastructure. But the “new urbanization” that is about to start coincides with the shift of the “world’s factory” to Southeast Asia, Latin America and elsewhere and could only depend on government policy. Therefore, the first question for the “new urbanization” is that where to raise the huge money needed?
Judging from the current situation, this new urbanization is solely driven by policy and thus there can only be one major source of investment, the government funds.
In the past five years, the Chinese government sought to avoid recession and keep thriving amidst the global economic downturn by issuing astronomical amount of currency. The so-called 4 trillion by the Central government and over a dozen trillion in investment by local governments were just approximate numbers. The amount of currency issued by China’s central bank far exceeded this figure, as proven by data: by the end of 2012, the global M2 balance was as high as 366 trillion dollars, the amount of China’s new issued money was half the world’s total. Take 2011 for example, China’s contribution was up to 52% of the world’s new currency; and at the end of 2012, China’s M2 balance was close to 100 trillion. Interestingly, despite being the world’s largest cash printer, China has been openly condemning Japan for its unlimited monetary easing policy.
With new issuance at a scale rarely seen in the world’s history, coupled with the RMB not being an international currency, the impact of excessive issuance could only be digested domestically and it resulted in severe inflation. The so-called inflation indicators of the China's National Bureau of Statistics were far lower than the price increases felt by the Chinese people. However, the property price is a fact that they cannot hide.
In 2012, British luxury property consultant Knight Frank announced the average house prices increase in the last five years among countries. China topped the list with an increase of more than 110%; Hong Kong, and Israel ranked second and third; Taiwan, with an average increase of 30.1% in house prices over the past five years, came sixth.
The statistics calculated the average increase of all countries from the fourth quarter of 2006 to the fourth quarter of 2011 and showed that the housing price in China has more than doubled over the past five years. Take Beijing and Shanghai for example. In 2011, the average housing transaction price in Beijing stood at 13,173 yuan per square meter and the city's per capita income was 32,903 yuan. A person's annual income was enough to purchase 2.5 square meters of flat; in Shanghai, the average housing price was 13,448 yuan per square meter, and the per capita income there was 36,230 yuan, the annual income of an individual could purchase 2.69 square meters of flat.
The rapid rise in property prices illustrated that the "economic boom" China maintained by massive over-issuance of money came at the costs of the swift devaluation of the currency and the drastic diminution of the people's wealth. A property market that is above the purchasing power of the majority of the members of a given society and is supported mainly by speculators is only a highly inflated economic bubble. If the government continues to make investment to push for “new urbanization” before the bubble subsides, there will be serious consequences. David Daokui Li, former member of the Monetary Policy Committee of the People's Bank of China, believed that China with such a huge amount currency in stock is like placing a “dammed lake” above it, “A stock of money too large in scale would bring corresponding risks, such as high inflation, asset price bubble or the outflow of funds.”
These are what China is experiencing right now. Regarding the amount of capital outflow, I quoted in “Xi Jinping’s Dilemma: to fight corruption or not to fight” a report by the Central Commission for Discipline Inspection (CCDI) and calculated the ratio of that to the GDP of the year: in 2012 the amount of capital outflow was estimated to exceed $1 trillion, making up 12% of the year’s GDP of $ 8.23 trillion; in 2013, the scale of illegal capital outflow is expected to reach $ 1.5 trillion, based on the annual GDP growth rate of 7%, that would approximately be 17% of the year's GDP.
Second, who would purchase the apartments constructed in the “new urbanization”?
As the term “new urbanization” implies, the focus of future urbanization would shift from Beijing, Shanghai, and Guangzhou to cities of third- and fourth-tiers. But whatever types of cities that would be, apartments constructed have to be purchased, or there won’t be “sustainable development”. Now let’s analyze what kinds of people there are in China that could be potential apartment buyers.
China’s property prices have rendered over 80% of the Chinese people unable to become buyers. Before 2009, China’s property buyers comprised big and small speculators from inside the country and worldwide; after 2009, it was domestic speculators that made up property buyers. These people purchased apartments not for rent or their own use; they stocked up the apartments to preserve the value of their assets and wait for an opportunity to reap a profit. The “apartment families” that got exposed since November 2012 were just a few of those.
The “apartment family” mainly set their target in big and medium-sized cities like Beijing and Shanghai as there is great potential for appreciation, the market is relatively stable and it is easier to cash. They basically would not consider third- and fourth-tiers cities. Therefore, even after a round of promotion, the demand for real property in third- and fourth-tiers cities remains cold. Recently, major property enterprises withdrawn from third- and fourth-tiers cities and moved back to the first-tier ones in succession, the “ghost towns” are spreading in China.
What is more, since November 2012, Xi Jinping has been making “anti-corruption” rhetoric, coupled with the news that real property data network from 40 cities across the country would soon be (inter)connected, predominant members of the “apartment family” like officials and managers of State-owned enterprises jumped on the bandwagon to undersell their real property. These people are now cashing their real property and transferring their assets, and they would not reenter the property market in the near future. Without this legion of apartment buyers, who would purchase the apartments constructed in the “new urbanization” process?
Although I am aware that the "new urbanization" is the most important development plan in the heart of the incoming Prime Minister, I would in no way be able to envisage the following: what is the difference between the apartments that will be built in the "new urbanization" process and the 6,540,000 idle units in 660 cities across the country? Will this difference be so significant that those future apartments would actually attract enough buyers?
According to Chinese media reports, on average 450 acres of arable land are “requisitioned” each day in China, the urbanization project is like an arrow ready to leave the bow at any time. However, faced with the countless “ghost towns” in China—the samples of the bubble economy created by the power of the government, the policy makers should at least think through two questions: first, will the “dammed lake” of excessive currency issuance above their heads burst? and second, with hundreds of “ghost towns” that are already there, does China really need to construct yet more “ghost towns”?
Xi Jinping's Dilemma
Xi Jinping's Dilemma: to fight corruption or not to fight?
Original Article in Chinese: 习总的哈姆雷特之困：反腐败，还是不反？
By He Qinglian on January 30, 2013
Lately, CPC General Secretary Xi Jinping is caught in a Hamlet dilemma. The question on his mind, though, is not "to be or not to be", it is about fighting corruption.
By fighting corruption it could mean a general anti-corruption campaign or one that focuses on a small area; it could also imply a campaign with actions to be taken in full force or with some restraint.
To be fair, “not to fight corruption” is truly not what’s on Xi Jinping’s mind. Otherwise, he would not have personally led five other CPCCC Standing Committee members to the Central Commission for Discipline Inspection (CCDI), an organ oversaw by Wang Qishan, to deliver his speech that he would "catch both tigers and flies" when fighting corruption and corrupt officials, regardless of the scale of the bribe they took and their social prestige, would not escape punishment.
That speech was, in all probability, an attempt to correct Wang’s comment earlier that the anti-corruption campaign should be gentle and low-key. However, the dilemma Xi is facing is that there is an overwhelming number of both large and small bribe-takers—"tigers" and "flies"—in the government, and it is difficult to determine where and how to strike. Apartments owned by officials are but an example of a problem impossible to address.
The dramas triggered to officials' apartments in China are related to the economy and politics. And since these dramas are also relevant to the people's livelihood, they have become aggregation points for people's grievances. As a result, the anti-corruption campaign in China's officialdom and the mass selling of real property from late November 2012 could be likened to a two-act play in which officials assume the leading role and their apartments served as the predominant props.
The first act began when the so-called “the apartment families” that were exposed by an internet anti-corruption campaign in late November 2012. In the twenty-odd days to follow, netizens across the country took the opportunity to report officials of middle and low rankings who processed a dozen or even more than twenty luxury apartments. Based on the age and gender of those officials, they were dubbed “apartment uncle”, “apartment grandpa”, “apartment auntie”, “apartment sister”, “apartment girl” and “apartment ancestor” (!). Officials included in this list have at least a dozen apartments to their names. The most noticeable “apartment ancestor” at the moment is Cheng Shaochun, chief of Licheng District Public Security branch bureau, Jinan city, Shandong, who reportedly owns 16 luxury apartment complexes—not just apartments, but apartment complexes.
With reference to the property price in China, it is nearly impossible for the country's officials, regardless of their ranks, to purchase commodity flats using their salary alone, not to mention owning ten-odd or even dozens of apartments.
Without doubt, these apartments are related to their owners' acts of corruption.
Once dawned on the mind of those officials that their assets could come to light at any moment and would be used as the target to fight corruption, the apartments these officials used to see as the symbol of their wealth are now “risk assets”. The officials and their family became anxious about their apartments.
And so the second act of the play began. In dozens of cities across China there have been selling of apartments en masse.
According to a circular by the CCDI, the statistics prepared by the Ministry of Housing and Urban-Rural Development (MOHURD) and the Ministry of Supervision has it that 60% of the luxury apartments and mansions sold were owned in anonymity, using pseudonyms or corporate names. All of the sellers requested payment be made in cash and the money not to be wired via financial institutions; the selling of the property was done solely by lawyers and the owners did not show up in the entire transaction process.
After checking the initial purchase records and movements of capital between accounts, it was found that some of the owners who sold their property are public servants or in the rank of senior management in state-owned enterprises.
Allegedly, by mid-December, the CCDI, the General Office of the CPC, and the Organization Department of the CPCCC have already summoned over 120 senior officials currently in office to instruct them to tell their family to stop underselling property and closing bank accounts registered in anonymity or using pseudonym.
The anxiety caused by the apartment issue has eventually become the worries of the Party and the government. The CCDI circular has also listed the counts of recent withdrawal of foreign currency by the family members of middle and high-ranking public officials of Party and government organs in nine provinces and municipalities directly under the Central Government: Tianjin, Jiangsu, Shandong, Shanghai, Zhejiang, Guangdong, Fujian, and Hubei.
Guangdong topped the list with a withdrawal amount of 1.792 billion US dollar; and the lowest was 370 million US dollars. The CCDI circular stated that, according to incomplete statistics, the amount of illegal capital outflow in 2010 was 412 billion US dollars (6.9% of the year's GDP of 5.98 trillion US dollars); in 2011 the number reached 600 billion (8% of the year's GDP of 7.49 trillion US dollars); in 2012, the number was projected to exceed one trillion US dollars (12% of the year's GDP of 8.23 trillion US dollars); in 2013, the scale of illegal capital outflow is expected to reach 1.5 trillion (based on the annual GDP growth rate of 7%, that would approximately be 17% of the year's GDP of 8.8 trillion.)
The worries of the Party and the government are of course not just limited to this. When the officials undersell their apartments, it means they would not become new buyers of real property in future. And this is relevant to the smooth implementation of future economic development plan—the new urbanization project, I would present my analysis of this in a separate article.
Judging from the Economic Observer report on January 18, the CCDI has a fairly accurate understanding of the number of apartments owned by officials across the country. It was several years ago when the MOHURD started the establishment of the information system of individual property ownership in 40 cities. The time that system became publicly available for use was, however, postponed time and again. To this date the list of those 40 cities has still not been announced. Reportedly some of the cities have not yet completed the makeup of the housing history archival data. The reasons for the slow progress are that, apart from the complexity of the data entry work, the project encountered invisible boycott from officials of various regions.
It was said that to ensure smooth progress of the data entry work, MOHURD Minister Jiang Weixin told senior officials across the country that “the housing data of a particular individual would be retrieved only when there is consent from the Municipal Committee Secretary, the Mayor, and personnel from the MOHURD.”
Deputy Minister of the MOHURD once said that “the data collected from ministries, and provincial (regional) government is for statistical, analytical and aggregation purposes only; apart from local inquiry made in accordance with existing relevant provisions, no other inquiry service would be provided.
The government of the Guangdong province promised that the housing data gathered would be for statistical, analytical and aggregation purposes only, inquiry permission would be set in strict accordance with the relevant provisions.
It is precisely because the data has close relevance to the amount of assets owned by officials that a professor doing a research project of individual housing information system said:
Data entry of individual housing information is a risky job. Officials of the relevant department who have higher “political consciousness” would be reluctant to take this “hot potato”.
Regarding the issue of property ownership alone, there is concrete evidence of corruption of officials across the country, and Xi Jinping has repeatedly expressed his determination to crack down on corruption. Now there is only one problem left: to fight corruption or not to fight.
In view of the people's interests, Xi Jinping has to punish these officials because “he came from the people”, a propaganda highlight of the Xinhua News Agency since Xi ascended to the highest position in November 2012.
And the feature article about Xi Jinping was entitled “the people is the spring of our strength”.
But to make the people feel happy would mean great suffering to the Party cadres. If Xi is serious about fighting corruption, like carrying out the campaign pursuant to the provisions laid out by the Criminal Code, then his every move could be startling.
I did a quick check and found that the Article 383 of the Criminal Code stipulates four levels of meting out punishment on corruption. The lightest punishment would be criminal detention for fewer than two years for taking bribes of less than 5000 yuan; the heaviest sentence would be ten years or life imprisonment and confiscation of property for those who took bribes of more than 100,000 yuan. For cases of particular seriousness, the convicts would be punishable by death and the confiscation of property.
If Xi Jinping truly means to rule by law, then the majority of cadres of numerous Party organs and government departments are likely to get the maximum penalty pursuant to the Criminal Codes about corruption. In that case, how would Party offices and the government function?
Therefore, the "best" way is to hold high the banner of "anti-corruption"—otherwise the Party could hardly face the people, and Xi Jinping would be considered untrustworthy—and secretly amend the Criminal Codes, so that the meshes of the “cage” would be both big and wide, say by allowing every official to own 5 to 20 apartments in accordance with their respective ranks and put forward the crime of “illegally obtaining individual housing data” to deter those troublemakers who dare to leak on the Internet information of assets owned by officials.
In so doing, the “anti-corruption campaign” could achieve instantaneous results and end swiftly. If not, Xi's campaign would end up like the alcohol ban imposed by Yuri Andropov, General Secretary of the CPSU—scrapped without any success. However, Andropov managed to hunt down a few “tigers” such as the sons- and brothers-in-law of Brezhnev, his predecessor, former General Secretary of the CPSU in his anti-corruption campaign when he newly assumed office.
Original Article in Chinese: 习总的哈姆雷特之困：反腐败，还是不反？
By He Qinglian on January 30, 2013
Lately, CPC General Secretary Xi Jinping is caught in a Hamlet dilemma. The question on his mind, though, is not "to be or not to be", it is about fighting corruption.
By fighting corruption it could mean a general anti-corruption campaign or one that focuses on a small area; it could also imply a campaign with actions to be taken in full force or with some restraint.
To be fair, “not to fight corruption” is truly not what’s on Xi Jinping’s mind. Otherwise, he would not have personally led five other CPCCC Standing Committee members to the Central Commission for Discipline Inspection (CCDI), an organ oversaw by Wang Qishan, to deliver his speech that he would "catch both tigers and flies" when fighting corruption and corrupt officials, regardless of the scale of the bribe they took and their social prestige, would not escape punishment.
That speech was, in all probability, an attempt to correct Wang’s comment earlier that the anti-corruption campaign should be gentle and low-key. However, the dilemma Xi is facing is that there is an overwhelming number of both large and small bribe-takers—"tigers" and "flies"—in the government, and it is difficult to determine where and how to strike. Apartments owned by officials are but an example of a problem impossible to address.
The dramas triggered to officials' apartments in China are related to the economy and politics. And since these dramas are also relevant to the people's livelihood, they have become aggregation points for people's grievances. As a result, the anti-corruption campaign in China's officialdom and the mass selling of real property from late November 2012 could be likened to a two-act play in which officials assume the leading role and their apartments served as the predominant props.
The first act began when the so-called “the apartment families” that were exposed by an internet anti-corruption campaign in late November 2012. In the twenty-odd days to follow, netizens across the country took the opportunity to report officials of middle and low rankings who processed a dozen or even more than twenty luxury apartments. Based on the age and gender of those officials, they were dubbed “apartment uncle”, “apartment grandpa”, “apartment auntie”, “apartment sister”, “apartment girl” and “apartment ancestor” (!). Officials included in this list have at least a dozen apartments to their names. The most noticeable “apartment ancestor” at the moment is Cheng Shaochun, chief of Licheng District Public Security branch bureau, Jinan city, Shandong, who reportedly owns 16 luxury apartment complexes—not just apartments, but apartment complexes.
With reference to the property price in China, it is nearly impossible for the country's officials, regardless of their ranks, to purchase commodity flats using their salary alone, not to mention owning ten-odd or even dozens of apartments.
Without doubt, these apartments are related to their owners' acts of corruption.
Once dawned on the mind of those officials that their assets could come to light at any moment and would be used as the target to fight corruption, the apartments these officials used to see as the symbol of their wealth are now “risk assets”. The officials and their family became anxious about their apartments.
And so the second act of the play began. In dozens of cities across China there have been selling of apartments en masse.
According to a circular by the CCDI, the statistics prepared by the Ministry of Housing and Urban-Rural Development (MOHURD) and the Ministry of Supervision has it that 60% of the luxury apartments and mansions sold were owned in anonymity, using pseudonyms or corporate names. All of the sellers requested payment be made in cash and the money not to be wired via financial institutions; the selling of the property was done solely by lawyers and the owners did not show up in the entire transaction process.
After checking the initial purchase records and movements of capital between accounts, it was found that some of the owners who sold their property are public servants or in the rank of senior management in state-owned enterprises.
Allegedly, by mid-December, the CCDI, the General Office of the CPC, and the Organization Department of the CPCCC have already summoned over 120 senior officials currently in office to instruct them to tell their family to stop underselling property and closing bank accounts registered in anonymity or using pseudonym.
The anxiety caused by the apartment issue has eventually become the worries of the Party and the government. The CCDI circular has also listed the counts of recent withdrawal of foreign currency by the family members of middle and high-ranking public officials of Party and government organs in nine provinces and municipalities directly under the Central Government: Tianjin, Jiangsu, Shandong, Shanghai, Zhejiang, Guangdong, Fujian, and Hubei.
Guangdong topped the list with a withdrawal amount of 1.792 billion US dollar; and the lowest was 370 million US dollars. The CCDI circular stated that, according to incomplete statistics, the amount of illegal capital outflow in 2010 was 412 billion US dollars (6.9% of the year's GDP of 5.98 trillion US dollars); in 2011 the number reached 600 billion (8% of the year's GDP of 7.49 trillion US dollars); in 2012, the number was projected to exceed one trillion US dollars (12% of the year's GDP of 8.23 trillion US dollars); in 2013, the scale of illegal capital outflow is expected to reach 1.5 trillion (based on the annual GDP growth rate of 7%, that would approximately be 17% of the year's GDP of 8.8 trillion.)
The worries of the Party and the government are of course not just limited to this. When the officials undersell their apartments, it means they would not become new buyers of real property in future. And this is relevant to the smooth implementation of future economic development plan—the new urbanization project, I would present my analysis of this in a separate article.
Judging from the Economic Observer report on January 18, the CCDI has a fairly accurate understanding of the number of apartments owned by officials across the country. It was several years ago when the MOHURD started the establishment of the information system of individual property ownership in 40 cities. The time that system became publicly available for use was, however, postponed time and again. To this date the list of those 40 cities has still not been announced. Reportedly some of the cities have not yet completed the makeup of the housing history archival data. The reasons for the slow progress are that, apart from the complexity of the data entry work, the project encountered invisible boycott from officials of various regions.
It was said that to ensure smooth progress of the data entry work, MOHURD Minister Jiang Weixin told senior officials across the country that “the housing data of a particular individual would be retrieved only when there is consent from the Municipal Committee Secretary, the Mayor, and personnel from the MOHURD.”
Deputy Minister of the MOHURD once said that “the data collected from ministries, and provincial (regional) government is for statistical, analytical and aggregation purposes only; apart from local inquiry made in accordance with existing relevant provisions, no other inquiry service would be provided.
The government of the Guangdong province promised that the housing data gathered would be for statistical, analytical and aggregation purposes only, inquiry permission would be set in strict accordance with the relevant provisions.
It is precisely because the data has close relevance to the amount of assets owned by officials that a professor doing a research project of individual housing information system said:
Data entry of individual housing information is a risky job. Officials of the relevant department who have higher “political consciousness” would be reluctant to take this “hot potato”.
Regarding the issue of property ownership alone, there is concrete evidence of corruption of officials across the country, and Xi Jinping has repeatedly expressed his determination to crack down on corruption. Now there is only one problem left: to fight corruption or not to fight.
In view of the people's interests, Xi Jinping has to punish these officials because “he came from the people”, a propaganda highlight of the Xinhua News Agency since Xi ascended to the highest position in November 2012.
And the feature article about Xi Jinping was entitled “the people is the spring of our strength”.
But to make the people feel happy would mean great suffering to the Party cadres. If Xi is serious about fighting corruption, like carrying out the campaign pursuant to the provisions laid out by the Criminal Code, then his every move could be startling.
I did a quick check and found that the Article 383 of the Criminal Code stipulates four levels of meting out punishment on corruption. The lightest punishment would be criminal detention for fewer than two years for taking bribes of less than 5000 yuan; the heaviest sentence would be ten years or life imprisonment and confiscation of property for those who took bribes of more than 100,000 yuan. For cases of particular seriousness, the convicts would be punishable by death and the confiscation of property.
If Xi Jinping truly means to rule by law, then the majority of cadres of numerous Party organs and government departments are likely to get the maximum penalty pursuant to the Criminal Codes about corruption. In that case, how would Party offices and the government function?
Therefore, the "best" way is to hold high the banner of "anti-corruption"—otherwise the Party could hardly face the people, and Xi Jinping would be considered untrustworthy—and secretly amend the Criminal Codes, so that the meshes of the “cage” would be both big and wide, say by allowing every official to own 5 to 20 apartments in accordance with their respective ranks and put forward the crime of “illegally obtaining individual housing data” to deter those troublemakers who dare to leak on the Internet information of assets owned by officials.
In so doing, the “anti-corruption campaign” could achieve instantaneous results and end swiftly. If not, Xi's campaign would end up like the alcohol ban imposed by Yuri Andropov, General Secretary of the CPSU—scrapped without any success. However, Andropov managed to hunt down a few “tigers” such as the sons- and brothers-in-law of Brezhnev, his predecessor, former General Secretary of the CPSU in his anti-corruption campaign when he newly assumed office.
Numbers About China’s Social Inequality Don’t Add Up
Official data widely seen as attempt to hide growing potential for social unrest
China’s National Bureau of Statistics recently published Gini coefficients for 2003 through 2012 after a decade of silence on this topic. The data shows the coefficient peaked in 2008 at 0.491 but has gradually dropped since then. According to the official statistics, in 2012 it stood at 0.474.
However, the numbers have been widely questioned. Most college-educated Chinese know that the Gini coefficient is an index measuring inequality, and a Gini coefficient of 0.4 and above may lead to social unrest.
Doubt Over Government’s Credibility
Hu Jintao and Wen Jiabao’s 10-year rule not only exhausted China’s environment and overdrew its financial power (with local governments deeply in debt), but what’s worse, it expended the government’s credibility. In particular, the fact that million-dollar households in China amounted to 670,000—the third highest in the world and next to only the United States and Japan—has irritated the public the most.
At the same time, with housing prices soaring and unemployment and income inequality worsening, those in the lower class find moving up increasingly difficult, while those in the middle class can easily slip down.
In the midst of intensifying social polarization and social degeneration, the tidbits of information that have made it through tight censorship have given ordinary Chinese occasional peeks into how China’s wealth has been centralized in the hands of a few.
According to a set of Chinese Ministry of Finance data widely quoted since 2010, the wealthiest 10 percent of households possesses 45 percent of wealth in urban areas, while the poorest 10 percent of households owns only 1.4 percent.
Many Chinese also know that 64.3 percent of the Chinese population falls into the low and mid-low income groups. As recently as 2005, 19 percent of the population, or 254 million, lived below the international poverty line of a $1.25 per day.
The propaganda of the Chinese communist regime claims the United States has the highest concentration of wealth and highest income inequality in the world. But according to the World Bank, 5 percent of Americans controls 60 percent of the country’s total wealth, while in China 1 percent households owns 41.4 percent.
This means the concentration of wealth in China has far exceeded that in the United States, and China has become the most polarized country in the world.
While the Bureau of Statistics had kept the nation’s Gini coefficient as a secret for a decade, other research institutes have publicized their own findings.
The United Nations estimated that the number for China was over 0.52 in 2010, fourth highest in the world, and would go above 0.55 in 2011 while remaining fourth highest.
Among the more than 190 countries in the United Nations, about 150 have complete statistics, and less than 10 have Gini coefficients higher than 0.49. China’s number is only slightly lower than the world’s three most impoverished countries.
In December 2012, the Chinese Household Finance Survey Center of Chengdu’s Southwestern University of Finance and Economics cited a 0.61 Gini coefficient based on a 2010 survey of 8,438 Chinese households. The report also said that such an enormous income gap as exists in today’s China is a rarity in the world.
China’s Bureau of Statistics publicized its version of a decade’s worth of Gini numbers soon after the Southwestern University report was released, probably in an attempt to neutralize its effect. But the wide gap between the official numbers and other organizations’ statistics has been widely questioned.
Some bloggers said mockingly that there’s nothing you can do about income polarization, so you just change the Gini coefficient.
Blind Spot: Gray Income
A large portion of China’s social wealth is distributed in the form of gray income—the significant portion of urban residents’ income that is outside of state supervision and control.
While officials and the rich can easily obtain a large amount of gray income, ordinary Chinese rarely have such opportunities. The National Bureau of Statistics was not able to take into consideration the income from corruption in its Gini calculation, so the Bureau’s number cannot accurately reflect China’s real income gap.
The exact size of China’ gray income is impossible to know, but official data published in May 2012 gives some clue. In the past 30 years, 4.2 million Party officials were involved in corruption, including 90 provincial or ministry-level officials who were investigated and punished.
Although Chinese authorities have been conservative about making corruption cases public, many cases reported by the media involved embezzlement of tens or hundreds of millions of dollars.
The highest publicized record is held by Zhang Shuguang, the former director of the Transportation Bureau at the Ministry of Railways. He was sacked and accused of funneling US$2.8 billion into his offshore bank account.
In addition, corrupt officials often own tens of houses. For example, Chinese media recently reported that a former housing administration official was arrested because his immediate family members own 31 houses.
But what has been exposed is only a very small portion of the actual corruption in China. About 80 percent to 95 percent of corruption cases remain unpublicized or unpunished.
Most Chinese do not have the privilege of hearing a “state secret.” The red aristocrats, however, have used their powers to amass huge fortunes, and the sources, size, and whereabouts of their money are well-kept secrets. That’s why the state-run media could rebuke foreign dictators’ extravagance without feeling embarrassed.
But in 2012 a crack appeared in the official stonewalling about the wealth of the top regime figures. Political factions leaked confidential information their antagonists’ wealth to the world’s media in order to get the upper hand in a fierce power struggle. Reporters from the New York Times and Bloomberg exposed the tip of the iceberg of the red aristocrats’ wealth.
Though these media reports were censored in China, the stories have been widely spread through word-of-mouth.
A higher Gini coefficient means a greater income gap. As unemployment among new college graduates rises and the pathway to higher social status is blocked, poverty is passed down to the next generation in the impoverished population. If a society has more and more poor who can’t see a brighter future, hatred will build up and become unsolvable.
This translation first appeared here.
Accounting Firms’ Gold Rush Puts US Credibility on the Line
By He Qinglian on December 24, 2012.
Translated by Cao Yaxue on January 23, 2012.
The Securities and Exchange Commission in December charged the Chinese affiliates of five big accounting firms Deloitte, Ernst & Young, KPMG and PwC and BDO for failing to comply with laws requiring access to the work papers of their audit on Chinese companies. The SEC was supposed to make a decision at the end of the December, including the possibility of delisting all Chinese companies in the US exchange. But the “deadline” has long passed and we haven’t heard the outcome of the suit. I am afraid it has probably disappeared into the black box called “diplomatic solutions.”
The Securities and Exchange Commission in December charged the Chinese affiliates of five big accounting firms Deloitte, Ernst & Young, KPMG and PwC and BDO for failing to comply with laws requiring access to the work papers of their audit on Chinese companies. The SEC was supposed to make a decision at the end of the December, including the possibility of delisting all Chinese companies in the US exchange. But the “deadline” has long passed and we haven’t heard the outcome of the suit. I am afraid it has probably disappeared into the black box called “diplomatic solutions.”
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