Income Distribution in Urban China During the Period of economic Reform and globalization By AZIZUR RAHMAN KHAN, KEITH GRIFFIN, AND CARL RISKIN* This paper addresses three issues that are ber of urban households was reduced to 6,931 central to understanding the effects of the (or 21, 694 persons) transition in China from central planning to It is now possible, for the first time,to a more market-oriented economic system. measure changes in the degree of income in First, what have been the consequences of equality in urban areas using internationally the economic reforms for the distribution comparable concepts of income. It is also of income in urban areas? Second, what has possible to use the two surveys to determine happened to the incidence of urban poverty? which components of total income have con Third, have government policies helped to tributed most to the change in inequality diminish or accentuate urban poverty and in- The basic data are presented in Table 1 equality? Answers to these questions are Between 1988 and 1995 the Gini coeffi based on a comparison of two national sam- cient for the distribution of household in ple surveys conducted in 1988 and 1995 come per capita increased from 0.233 to 0.332, or by 42.5 percent(row 1). Although I. Changes in Urban Inequalit the degree of inequality still is low in com parison with other developing countries, the The distribution of income in urban China sharp increase in inequality in only seven in 1988, ten years after the economic reforms years is remarkable. Equally remarkable is began, was remarkably egalitarian. True, ur- the change in the composition of income that ban inequality had increased, but the Gini co- occurred during that period, notably, the rise efficient continued to be lower than in any in cash income from employment from 44.4 other country for which data are available. percent to 61.3 percent of total income(row These results were based on a survey of urban 2), the rise in the relative importance of and rural incomes organized by an interna- pensions (row 3 )and of the rental value of tional group of economists working with col- owned housing (row 6)combined with the leagues in the Economics Institute of the fall in the importance of housing subsidies Chinese Academy of Social Sciences. The ur- (row 7), and the virtual disappearance of ban portion of the 1988 survey contained other subsidies net of direct taxes and fees 9,009 households (31, 827 persons drawn (row 8). In 1988, urban households were de- tive of urban conditions throughout China. and the government for 39 percent of their The 1988 survey was replicated in 1995. The income; by 1995, subsidies accounted for number of provinces covered was increased by only 11 percent of household income one with the addition of Sichuan, but the num- We also report the concentration ratios for ach of the nine components of income in ble 1. These concentration ratios are calculated in the same way as Gini coefficients except iked in order of versity of Califor iverside, CA 92521-0427: Riskin lumbia University, New York, NY ovinces were Beijing municipality, Shanxi, Inequality in China: Composition, Distribution and Liaoning, Jiangsu, Anhui, Henan, Hubei, Guangdong, Growth of Household Income, 1988 to 1995, China Quar- terly, June 199