China, People’s Republic

The Evolution of Income Distribution Disparities in China since the Reform and Opening-up (Han Wenxiu); Income Disparities in China: A Review of Chinese Studies (Feng Jianlin); Disparities between Urban and Rural Areas and among Different Regions in China (Yin Yanlin); The Urban and Rural Poor in China and their Income-earning Potential (Huang Yanfen and Yang Yiyong); Analysis of Income Distribution in China’s Poverty-stricken Counties: A Case Study of the Qinglong County of Hebei Province (Zhao Kun); Income Disparities in Post-Reform China: A Review of the International Literature (Marie-Ange Maurice and Peter Whiteford); Apparent Sources of Income Inequality in China or Plausible and Less Plausible Interpretations of Imperfect Data (Anders Reutersward)

Over the last three decades, urban development has taken off in the People’s Republic of China, in tandem with its extraordinary growth performance. On the whole, urbanisation and development have reinforced one another. The growth of cities has been driven in large part by the dramatic growth in agricultural productivity set in motion by the first wave of reforms and the end of the 1970s, which reduced the need for labour on the land and generated unprecedented income growth. This, in turn, helped spur the development of China’s urban sectors, which took off as the country opened up to external markets, turning China into an export powerhouse. As cities grew larger and denser, the economic benefits of agglomeration came into play, helping to sustain productivity growth. The results have been staggering. The urban population has roughly quadrupled, reaching more than 750 million. Hundreds of millions of people have been lifted out of poverty, and China has been transformed from an overwhelmingly agrarian and relatively poor country into a predominantly urban, industrial middle-income economy. GDP has risen more than 16-fold, and its share of global GDP has risen almost 7-fold.

According to the census-based definition, the rural population of the People's Republic of China (hereafter: China) was 737 million in 2006, accounting for 56% of the national total. China is thus still a predominantly rural country with the second largest rural population in the world, after India. The rural population is unevenly distributed across China’s territory: half of it is concentrated in eight provinces. In contrast, the three largest provinces in terms of area, namely Xinjiang, Tibet and Inner Mongolia, represent more than 40% of the national territory, but their rural population accounts for less than 4% of the total. Rural population density is highest in coastal Shandong, Tianjin, Jiangsu and in centrally located Anhui and Henan where it exceeds or is close to 300 persons per km2 and lowest in Tibet, Qinghai and Xinjiang, all located in the west, where it is below ten persons per km2. Low density in the largest provinces results in a relatively low average density of rural population in China at around 75 persons per km2.

As it enters the 13th Five-Year Plan period (2016-20), the Chinese economy continues to grow fast by international standards. While growth is slowing gradually, GDP per capita remains on course to almost double between 2010 and 2020 (). As a result, the Chinese economy will remain the major driver of global growth for the foreseeable future. Notwithstanding the economy’s impressive performance and unprecedented poverty reduction (Panel C), imbalances have built up. China’s growth has long been driven by capital accumulation, supported by high savings. However, the growth model has led to misallocation of capital and falling investment efficiency, and to excess capacity in some manufacturing industries and in the real estate sector, which needs to be worked off. High enterprise investment was financed by debt, fuelled by interest subsidies and implicit guarantees for SOEs and other public entities. Effectively addressing sources of risk, such as excessive corporate leverage, real estate bubbles and leveraged investment in asset markets will help keep growth on a sustainable path. The authorities may need to forgo some growth in the short run to ensure greater stability over the longer run, with a wider spread of the benefits of growth across society and less stress on a highly polluted environment.

China has weathered the global economic and financial crisis of the past five years better than virtually any OECD country and than many other emerging economies. It is well placed to enjoy a fourth decade of rapid catch-up and improving living standards, notwithstanding various risks: in the near term, global economic conditions might be less supportive than projected; there are also concerns about property prices and excessive off-balance sheet financing by the banking system and local governments; and over the longer run, inequalities and ageing are sources of tension. However, China can avoid the middle-income trap provided reforms are continued or stepped up. Encouragingly, in November 2012, the 18th Congress of the Chinese Communist Party called for further reforms in a number of areas, most of which are touched upon in this Survey ().

Guangdong is China’s most populous province. With 95.4 million inhabitants, its population size, which represents one-third of that of the United States, and 75 to 90% of that of Japan and Mexico, exceeds all other OECD member countries. The total land mass of the province is almost equal to that of the United Kingdom. Unsurprisingly, the density is strikingly high, actually the highest among China’s provinces, and above that of all OECD member countries. This high concentration of population is linked to a deep urbanisation process (a 63.4% urbanisation rate compared to the national average of 46%) whose rate over the last two decades is probably unprecedented in human history. Chosen as a test bed for a wide range of economic reforms when China introduced the “Open Door” policy in 1978, Guangdong has transformed itself from a backward agricultural, lagging region into a dynamic industrial-based economy. Attracted by massive job creation, a sustained inflow of rural migrant workers from other provinces has fuelled Guangdong’s high annual population growth, which over 1990-2008, stood at 2.8%, i.e. more than 3 times China’s average and 4 times the OECD average.

Since the OECD’s first Economic Survey of China in 2005, China’s economy has continued to expand rapidly, driven to a large extent by the development of the private sector. Exports were hit hard by the global crisis and activity slowed down sharply over the course of 2008. However, prompt and vigorous policy actions, as well as swift adjustment in the labour market, helped growth pick up by the second quarter of 2009, putting China in the lead of the global recovery. Going forward, China’s importance in the world economy is set to increase further, as are living standards within the country. In fact, China already has the world’s second-largest economy in purchasing power parity terms, and is expected to shortly achieve the same rank at market exchange rates. It already has the world’s secondlargest manufacturing sector and is the world’s largest exporter of goods. Growth will likely continue to be driven largely by investment and a trend shift out of low-productivity agriculture, as the urbanisation rate, which is approaching 50%, continues to rise. While the size of the labour force is not projected to increase much, education levels have soared since the early 1980s, which will support future productivity growth.

The Survey was prepared by Margit Molnar and Ben Westmore, with contributions from Chunyan Bian, Ruidong Gao, Thomas Chalaux and Clara García, under the supervision of Vincent Koen. Secretarial assistance was provided by Nadine Dufour and Mercedes Burgos.The Survey was discussed at a special seminar of the Economic and Development Review Committee on 26 January 2015, with participation of representatives of the Chinese government. The cut-off date for data and information used in the Survey is 12 March 2015.The Survey is published on the responsibility of the Secretary-General of the OECD.  

The Survey was prepared by Margit Molnar, Ben Westmore and Thomas Chalaux, with contributions from Jiangyuan Lu, Wenhao Chen, Baolin Wang and Hyunjeong Hwang, under the supervision of Vincent Koen. Secretarial assistance was provided by Mercedes Burgos and Sisse Nielsen.The Survey was discussed at a meeting of the Economic and Development Review Committee on 23 January 2017, with participation of representatives of the Chinese government. The cut-off date for data and information used in the Survey is 12 March 2017.Empirical analysis in the Survey benefitted from a voluntary contribution from the Government of the Republic of Korea.The Survey is published on the responsibility of the Secretary-General of the OECD.

This Survey was prepared by Margit Molnar under the supervision of Patrick Lenain. The Survey benefitted from contributions by Ting Yan, Yusha Li, Yiying Shi, Assaf Geva, Zhihao Chen and Ran Xu. Hyunjeong Hwang provided the statistical assistance and Stephanie Henry provided editorial support. The Survey was discussed at a meeting of the Economic and Development Review Committee on 14 January 2019, with participation of representatives of the Chinese government led by the State Information Centre. The cut-off date for data and information used in the Survey is 15 March 2019. The previous Survey of China was issued in March 2017.The Survey is published on the responsibility of the Secretary General of the OECD. Information on other Surveys and how they are prepared is available at www.oecd.org/surveys