The Wealthy Get Wealthier

By+Wang+Hairong

Vermilion wooden doors， gray brick walls and exquisitely carved marble stones—the elements typical of traditional upperclass Chinese architecture have been replicated in the Courtyards on Canal Bank， a luxury residential area in Beijing， to reflect the wealth and status of property owners.

The residential compound has been rated as one of Chinas top 10 luxury estates in 2014. The promotional material for the compound claims that the grey bricks are made of volcanic rocks formulated more than 100 million years ago and quarried from a seabed 1，000 meters beneath the oceans surface. Many trees in the gardens are more than 100 years old and have been painstakingly transplanted from various locations across the country. It was said that every Ginkgo tree in the gardens is worth more than$30，000. A single property here， between 350-3，500 square meters in area， costs somewhere between millions and tens of millions of dollars.

Although the prices are out of the reach of the average people in China， they are quite affordable for the countrys super-rich.

Yawning gap

More than three decades of economic boom in China has brought enormous wealth to the country. From 1980 to 2013， Chinas GDP soared from $189.40 billion to more than$9.24 trillion， according to the World Banks World Development Indicators data. That is to say its national wealth multiplied approximately 49 times. Meanwhile， per-capita GDP also surged from $193 to $6，807， represent- ing a 35-fold growth.

When initiating reform and opening-up， the late leader of China Deng Xiaoping said that some people should be allowed to get rich first. In the 1980s， private businesses sprouted up across the country. Now， the countrys richest citizens own fortunes in the billions. On September 23， Hurun Research Institute released the Hurun Rich List 2014. On the list， 354 Chinese residents own more than $1 billion， up 39 from last year， whereas 10 years ago， that number was only three.

Alibaba Groups founder Jack Ma was recently crowned the countrys richest man. The recent initial public offering of Alibaba Group on the New York Stock Exchange swelled his fortune to $25 billion， up five times on last year， according to Hurun Research Institute.

Of the top 10 on the Hurun Rich List 2014， five， including Baidus founder Robin Li， Tencent Groups Pony Ma， JD.coms Richard Liu and Xiaomi Technologys Lei Jun， made their money from Internet technology. Wealth gleaned from real estate has introduced two billionaires， namely Wanda Groups Wang Jianlin and Reignwoods Yan Bin， to the list， whereas in 2013， six of the top 10 were in real estate.

On September 12， Hurun Research Institute also published a report on Chinas high net worth individuals， defined as people with net worth exceeding 10 million yuan（$1.6 million）.

The report said that these millionaires primarily consist of four types of people： private business owners， professional stock market investors， real estate investors and high-salaried corporate executives， who respectively accounted for 55， 10， 15 and 20 percent of the total.

According to the institute， as of the end of 2013， China had a total of 1.09 million high net-worth individuals， up 3.8 percent from the previous year. Among them， the number of super-rich， defined as individuals with personal wealth of at least $16 million， reached 67，000.

Some of Chinas super-rich are also among the wealthiest on this planet. According to Forbes， of the worlds 1，645 billionaires in 2014， China accounts for 152，more than Russias 111， and second only to the 492 of the United States.

Although the society has become much more affluent overall， wealth has been distributed more unevenly.

Now the countrys top 1 percent of households own more than one third of all wealth， whereas the bottom 25 percent own about 1 percent of the total， according to a report released by the Institute of Social Science Survey of Peking University in July.

By the UNs poverty standard， China had 128 million people still living under the poverty line， said President Xi Jinping on March 25， 2013.

Peking Universitys report said Chinas wealth inequality has surged in the past few decades. The Gini coefficient for wealth disparity increased from 0.45 in 1995， to 0.55 in 2002 and to 0.73 in 2012. A zero means complete equality， and a one means absolute inequality. Some experts consider a Gini coefficient higher than 0.4 to be undesirable.

The report also revealed that Chinese households consumption patterns are also polarized， with some living hedonistic lifestyles and some living very frugally.

Real estate accounts for a large share of Chinese households wealth， and the median percentage is 80 percent for urban households， and 60 percent for rural households. The share of real estate in a households total assets is higher in more economically advanced regions， and for high-income and affluent households， the report said.

Chinas wealth Gini coefficient is higher than income distribution， the report said. According to the National Bureau of Statistics， the countrys income Gini coefficient in 2013 was 0.473， lower than its record high of 0.491 in 2008.

Zhang Monan， an associate researcher with the State Information Center， said that irrationalities in the countrys distribution and redistribution systems have exacerbated wealth disparity.

While discussing problems with Chinas income distribution system， she said that currently， the proportion of labor income and salary to the national income is low and workers pay is much lower than that of executives.

She said that a salient problem with the countrys income redistribution system is its“regressiveness” and lack of a mechanism to transfer the operating capital gains of stateowned enterprises to residents.

Due to these factors， the income ratio of the highest 10 percent to that of the lowest 10 percent rose from 7.3 in 1988 to 23 in 2007， Zhang said.

But the income inequality is not the main factor that has caused the wealth polarization in recent years， she said. “the real estate has played a far greater role than salary in allocating wealth.”

As property prices soar， low-income groups can no longer afford to buy housing， and middle-income groups shoulder a proportionately heavier burden in paying mortgages， while property developers and local governments make huge profits， leading to wealth polarization， Zhang said.

Sharing the cake

Inequality cannot be corrected by the market， so the government should make policies to address it， said Nobel Prize-winning economist Joseph Stiglitz in his lecture at Tsinghua University on March 25.

He said that Chinas inequality is the fastest growing in the world. He suggested that China should impose capital gains tax， curb rent-seeking behaviors， and increase equality of opportunity.

According to Stanford Encyclopedia of Philosophy website， formal equality of opportunity requires that positions and posts that confer superior advantages should be open to all applicants. Applications should be assessed on their merits， and the applicant deemed most qualified according to appropriate criteria should be offered the position.

In China， the taxation on properties， especially on the properties of the “haves，” is relatively low and cannot redistribute much wealth， said Zhang of the State Information Center. So far， China has not levied property tax at the national level. Property tax has been piloted in such cities as Shanghai and Chongqing. She suggests that property tax， estate tax and gift tax be collected to regulate wealth distribution.

In recent years， the Central Government has made numerous efforts to guarantee the basic living standard for poverty-stricken people， such as giving them minimum living allowance， increasing minimum wages and lifting the threshold of personal income tax.

Chinas top leadership is engaged to reform the income distribution system and promote common prosperity， and to overhaul the fiscal and taxation systems so as to optimize resource allocation and promote social equity.

On August 29， a plan to adjust unreasonably high salaries of executives of centrally administered state-owned enterprises was approved. A real estate registration system is to be established， which is a necessary preparation for collecting property tax.