International experience suggests that the effect of globalization on economic
growth, poverty and income distribution can vary significantly among countries, and that
its impact depends crucially on national policies.
Liberalization of trade and investment
since the 1990s has brought high economic growth to China, and China has continued to
lift people out of poverty. Inequalities, however, have deepened as the distribution of
income and opportunities has shifted in favor of urban areas and coastal regions, leaving
rural areas and less developed regions farther behind. Among workers, those with skills
have seen their incomes grow much faster than others.
This report assesses the possible patterns of inequality in China in the future, and
outlines policy options that could help accomplish China ’
s objective of growth with
Growth and inequality projections suggest that, if recent trends in widening rural-
urban inequality and the disparate growth of per capita incomes across provinces
continue, income inequality would rise sharply, bringing the Gini coefficient up to 47.4
by 2020 (compared to 43.7 in 1999), with essentially equal contributions to national
inequality from the rural-urban and inter-provincial disparities.
For sustaining growth, the report emphasizes the freer flow of resources and
goods and services in the economy, to be achieved by domestic market integration and
. The report suggests that the cost of market fragmentation and rigidities is high,
and highlights measures to reduce local protectionism, facilitate migration, and
commercialize the banking sector.
To optimize the results of domestic market integration and promote growth with
equity, the report proposes a package of policy actions that would promote new job
opportunities, especially in the less developed regions, and raise returns on farm labor
. Among these, the report highlights investing in people, promoting the diffusion
of technology, facilitating urban agglomeration, expanding services and enhancing
farmers ’ prospects.
Finally, the report tackles the social, economic and fiscal risks that may threaten
future growth and distributional performance
. In particular, it suggests extending
different types of formal social security in both urban and rural areas, for fixing the inter-
government fiscal system in order to facilitate the provision of public services, and for
managing fiscal risk beyond the government budget and officially recognized debt.