Renmin University Professor's Startling Claim:
0.33% of the Rich Own 67% of Social Wealth
Li Bai, "Wendaozhe." Posted in the "Economic Reasoning" column, Guancha.cn, June 29, 2023. Translated by Vero Publishing.
China's richest 0.33 percent hold 67 percent of the country's social wealth, while public spending as a share of GDP is lower than in some Latin American countries. Professor Zhai Dongsheng, deputy dean of the School of International Studies at Renmin University of China,[1] recently made these figures public at the Forty-Person Forum on Political Economy. Some of his points are truly eye-opening.
Our economy is the second-largest in the world, but our level of social welfare is that of a typical developing country. Public social spending as a share of GDP is a basic measure of a country's welfare level: the share of GDP spent on healthcare, pensions, insurance, employment, housing, childcare and other social benefits. The OECD average is 21.6 percent; ours is only 6.5 percent.
The OECD includes not only developed countries and regions such as the United States, Japan and Europe, but also some Latin American countries. Some of these have lower per capita GDP and weaker industrial capacity than China, yet even Mexico's share of social spending is higher than ours.
So on the one hand our social welfare falls short even of Mexico's; on the other, our social wealth is highly concentrated in the hands of a tiny number of rich people.
According to a report on China's wealth distribution published in March, China's total wealth amounts to 790 trillion yuan, of which 430 trillion is held by the private sector and 360 trillion by the public sector. After forty years of reform and opening up, China has 4.6 million rich people, 0.33 percent of the population. They hold 290 trillion yuan, 67 percent of all private-sector wealth, or 63 million yuan per person. The middle class makes up 7 percent of the population and holds 110 trillion yuan, 26 percent of the total. The remaining 1.3 billion ordinary people, over 92 percent of the population, hold 30 trillion yuan, or 23,000 yuan per person.
Some experts now argue that common prosperity should be achieved by promoting the "third distribution," mainly by encouraging the rich to give to charity.[2] Zhai Dongsheng believes this is the wrong direction.
The report's data show that China's wealth distribution forms a cruel and inefficient pyramid, rather than an olive- or date-pit-shaped structure with a broad middle class. Zhai says China's distribution system is in fact very generous to the rich. Gains on stocks are not taxed, inherited wealth bears no estate or gift tax, and emigrants pay no exit tax on renouncing citizenship. In the United States all of these are taxed.
Achieving common prosperity therefore requires rebalancing distribution between capital and labor, and redistributing through the tax and welfare systems under the conditions of an open market economy.
It cannot be denied that the public sector and state-owned enterprises suffer from inefficiency and corruption, but they have also played a positive role. It is precisely because China has kept a fairly large public sector and many state-owned enterprises that the Chinese people can live somewhat decently. Their incomes are low, but they enjoy many inclusive public goods provided by local governments and state enterprises: roads, bridges, buses, subways, high-speed rail, bank accounts, mobile phone signal and mobile broadband.
By contrast, the United States has far fewer state-owned enterprises, so the very poorest find it hard to obtain public services that we take for granted. Many banks, for example, are unwilling even to open personal accounts for the poorest people, who can only take their paychecks to be cashed and are fleeced by check-cashing fees.
Translator's Notes
Zhai Dongsheng (翟东升). A professor of international relations at Renmin University of China, known for his commentary on political economy.
The "third distribution" (第三次分配). In official usage, the first distribution is through the market and the second through taxation and welfare. The "third distribution" is voluntary redistribution through charity and philanthropy, promoted in 2021 as part of the "common prosperity" agenda.
The figures in the article add up internally. The "1.3 billion ordinary people" is a rounded number: 92 percent of the population would be about 1.29 billion. The translation keeps it as in the original.