A report 《中国民生发展报告2014》 conducted by Peking University looks into some of the hotly discussed issues in today’s China, such as household assets, consumption patterns, medical expenses and the impact these have on people’s happiness. This objective approach opens a window on the waves of change passing through China’s economy and society, and the challenges and opportunities it brings.
The report’s main author Xie Yu, a professor at Peking University, notes that China’s household wealth has accumulated rapidly with economic reform, experiencing great changes in consumption levels, structure and quality, with self-employment increasingly popular. Yet at the same time Xie Yu discovered an unfair China in many respects, and a China gradually improving in problem areas such as housing and healthcare.
Xie Yu emphasised that these unfair distributions in wealth stemmed from the contradictions present in society, and warned of the vicious cycle of the rich getting richer, and the poor getting poorer. Therefore it’s the responsibility of academia to study this area further.
The report highlights how the uneven distribution of China’s household wealth is increasing. China’s Gini coefficient has risen sharply from 0.45 in 1995, to 0.55 in 2002, and 0.73 in 2012. The top 1% of households hold 1/3 of the nation’s wealth, whilst the bottom 25% of households together only hold 1% of the nation’s wealth.
Wealth inequality clearly exceeds income inequality, caused by the city-countryside and regional divides. In terms of household classes, two characteristics can be seen. Firstly asset in households with members ‘in the system’ (government officials, SOE workers) far exceed assets held by households whose members work ‘outside the system’ (private enterprise). Not only that, but the rate of asset increase for households ‘in the system’, outstrips those households ‘outside the system’. Secondly, the middle-class has experienced the greatest increase in assets, with smaller increases at both ends of the income scale.
Chinese household consumption is split into 5 categories, which fall under two different consumption trends:
i.) Zero/limited consumption
‘poverty & ill-health’: poor but relatively high expenditure on healthcare
‘ants’: low consumption overall
‘snails’: higher consumption but mainly on life’s basic necessities
ii.) High material consumption
‘dependable’: the middle-class, spending relatively more on consumer goods, and less on health and rent
‘indulgent’: spending relatively more on high-quality goods for a healthy life, education and recreation.
Most households lie in the zero/limited consumption bracket. Within this bracket, most households are likely to be rural and paying relatively more in health expenses.
Property is still the largest component of household assets in the towns and cities, with a share of 80%, yet falls to 60% in the countryside. This can be attributed to the lower land prices in the countryside, and the practice of building one’s own house, both of which save on costs.
Property forms a larger share of household assets in higher GDP or more developed regions, and for households with higher incomes or greater net-worth. When comparing the income from price rises with the cost of home purchase, urban households enjoy relatively higher income from price rises, whilst carrying a relatively higher burden of living. Urban households, where the person in charge works in the business or service industries, enjoy greater income from house prices. Whilst those holding high positions or are high income earners in highly skilled professions, government organs or in charge of work units, see less income from property prices, yet carry less housing burdens.
Another burden on households is the cost of medical treatment. According to the report, healthcare expenses as a proportion of household consumption in China stands at 11%, which is more than in major developed countries. Comparing data for 2010 and 2012, household expenditure on healthcare has increased in absolute terms, but decreased slightly when calculated as a share of overall consumption. This pattern exists in the more developed provinces, where household per capita healthcare expenses are higher, due to greater purchasing power, but form a smaller share of household consumption.
The urban-rural divide can also be seen in the area of healthcare, where it’s clear that rural households must spend relatively more not only on healthcare, but also on disaster related medical expenses, and self-funded medical expenses. This finding also exists between high and low income households. As expected, household per capita health expenses and share of consumption are the highest amongst older age groups. And those households with relatively greater expenditure on healthcare are at greater risk of falling into the ‘poverty trap’, especially in those low income households.
According to the report, Chinese citizens overall life satisfaction level is moderately increasing, but perceived social standing is decreasing. Household assets such as property and cars have a direct effect on personal satisfaction and perceived status in society. Independent of this, personal income also has a similarly large effect. People who feel their income is higher than the norm, have greater levels of life satisfaction, and higher perceived social standing, irrespective of whether or not they have wealth.
Those in the high income groups hold themselves to higher standards, hence perceive their income to be lower. Also, irrespective of personal income, those in high income household groups tend to have higher levels of life satisfaction and perceived social status, this particularly being the case amongst women.