Poverty in China v/s Poor Chinese.

Discussion in 'Economics' started by Jai, Jul 1, 2012.

  1. Jai


    When you or me confront 'certain Economic parameters' of the Chinese economy then there comes a Dengist proposition : ''Biding time, hiding capability'' that specifically justify the contemporary approaches adopted in the process of Economic structuralism. Or to say more : ''No matter what is the color of cat, whether it is black or white, who catches the mice first matters''. This holistically, as said above, are empirically functional (since so-called 1978 reforms) in the 'socialistic' mechanics of the so-called 'organic economy' of 'Mainland China'. However, I'm not being a Global McCarthyist against Keynesianist China whose economy is claimed to be 'unique' as officially asserted by the 'Top Chinese Bureaucrats' in the philosophical words of ''Socialist economy with Chinese characteristics'' but what immediately matters is the escalation of the inequitable and the income gap that is obviously causing income inequality within the ambit of China that may have illusioned the Global economy with its so-called good numbers.

    No doubt to claim that the standard of 'social capital' in China is comparatively better than the South Asian economies and even in the pursuit of establishing the '21st century as an Asian century' - - - China's contribution remains not only substantial but very significant. But to but to add a bitter fact I came to know that in 2006 there were 68,000 protests and in 2010 it were 72,000 protests in China. And in 2010, China funded by lending more than the World Bank. To endow, Corruption remains a major challenge to the Chinese economy that drains off the qualitative income required to fight 'absolute poverty' levels. To ensue, Government policies like One Child policy, Hukou system, etc constitute qualitative-less in the fight against 'relative poverty' levels.

    Applying the spectacles of Historicism, I precisely put down the four so-called modernizing schemes that were deliberately infused in by the Chinese Government to fight poverty since 1978 and they're as follows :

    - Rural Structural Revolution (1978-1985),
    - Massive Development-Oriented Programs (1986-1993),
    - 8-7 Assault on Poverty (1994-2000),
    - Development-Oriented Poverty Reduction Program (2001-2010).

    The above programs significantly wiped down the urban poverty but rural poverty hitherto pinches the desk of Chinese Top Public Policy planners. When China went red in 1949, Mao undertook Henry George's idea of land/agricultural reforms based on Marxist-Leninism principles that 'communed' but successfully failed. Therefore, the 'Democratic Consolidation of Spirits', 'The Great Leap Forward', 'The Cultural Revolution' all commenced under the Mao Zedong regime failed to wipe down the poverty levels but succeeded in wiping off millions of poor people.

    From my above preface, I prefer your reviews/debates on this topic. To assist, I accentuate crucial links/studies that present the official inputs as well as non-official information on the 'issue of Poverty and Poor people in China' :-

    Whether these are facts or fiction? http://www.china-mike.com/facts-about-china/facts-rich-poor-inequality/ I suppose Yes but No(?).

    Pakistan's Defense Forum have specifically under-rated the issue of asymmetries over Micro-Finance in China http://www.defence.pk/forums/world-affairs/151655-interesting-facts-about-poverty-china.html And I found out that it did not highlight certain steps undertaken by the Chinese Govt. to manage the micro-finances.

    I suppose its not a Western agenda(?) http://www.allgirlsallowed.org/category/topics/poverty-china Anyways, the subjective review http://en.wikipedia.org/wiki/Poverty_in_the_People's_Republic_of_China has to pragmatically inform more on the subject that have the greatest 'causal effect' implications http://en.wikipedia.org/wiki/Corruption_in_the_People's_Republic_of_China Moreover the Chinese economy, as claimed by Sino-Relativist, enjoys red rights and less of the blue rights but still are the red rights structurally manipulated by the Elite class in its Socialist economy? The Internet economy is rising 'peacefully' in Neo-Confucianist China despite of the horrible crackdowns but still I ratiocinate again that rural region is deprived of http://en.wikipedia.org/wiki/Digital_divide_in_the_People's_Republic_of_China.

    On April 8, 2012. At an International Conference, I presented a paper on Housing Management in China where I brought out about those resident-less sky crappers that posit certain so-called infrastructural development in Shanghai and Beijing like cities. The paper titled as 'Asymmetric Housing Management in China' is posted below as a conclusion to this thread:

    “The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the U.S. and U.K.", says Li Daokui, a professor at Tsinghua University and a member of the Chinese central bank’s monetary policy committee.


    Logically conclusive to proposition that the ‘State-controlled-Capitalist economy’ called as - China - on the knowledge and policy continuum is encountering one of the toughest challenge in the management of asymmetry options due to high level of Statism comprehension. In this context, this empirical paper will analytically highlight the various plight, predicament and tribulations encountered by housing arena that probably shells out the rosy picture by the Chinese government.

    The ever-morphing commercial skylines of Beijing, Shanghai, and Shenzhen; the stories of buy-and-flip property speculators; the sometimes garish consumer culture of China’s urban monied elite—no doubt about it, the new opiate of the masses on the mainland is real estate. In roughly a decade or so, urban China has evolved from having a heavily subsidized system of government-owned housing to a free-wheeling, market-driven one with all the opportunities and inequalities that come with it.

    Chinese of a certain age—now in their 40s or so—who worked for government-owned enterprises in the late 1980s or early '90s, started out in their careers paying only a fraction of their earnings for housing. As economic reforms deepened in the mid-1990s, both Chinese President Jiang Zemin and Premier Zhu Rongji started to dismantle that system, which was pretty much history by 1998. A more market-driven China needed labor mobility, a dynamic private sector, and a housing market that better reflected demand. "To get rich is glorious" became the new mantra.

    Today, China is richer, and that's unquestionably a good thing. A huge wave of privatizations, mergers, and shutdowns within the once-sprawling state-owned corporate sector has cleared away a lot of deadwood. Home ownership in big cities such as Beijing and Shanghai is high by global standards. Yet China is also home to far more income inequality, environmental wreckage, and social unrest. Mainlanders lucky enough to have gotten into the housing market over the last decade are enjoying a sweet ride. Younger couples and rural transplants are having a tough time finding affordable housing. Such is the social backdrop to the current great economic debate over how best to handle China’s overheated property market. Since April, Chinese President Hu Jintao’s government has taken steps to cool things down. Beijing now requires bigger down payments on higher-end properties and has imposed sales and capital gains on speculative property transactions. Developers, meanwhile, face higher financing costs and penalties for hoarding land.
  2. Jai



    In China’s 70 largest cities, residential and commercial property prices on average jumped 5.8% in June year on-year, according to the National Development & Reform Commission. That includes an 11.2% increase in Beijing, where 2008 Summer Olympic-related construction is fast and furious, and a head-turning 14.6% in Shenzhen, a thriving Southern Chinese city in the Pearl River Delta region. China’s banking system also has a huge exposure to commercial real estate and mortgage lending. Nobody wants to see a Japanese-style property bust visit a still-developing economy like China's. Yet even if it doesn’t come to that, Hu’s government needs to worry about a possible social backlash among a sizable chunk of the population whose incomes aren’t growing fast enough to keep up with spiraling housing costs. And we aren’t even talking here about the 800 million or so Chinese living in rural regions (where outrageous land seizures by local governments are common) but rather urban dwellers in Beijing and Shanghai. Back in July, the Ministry of Finance reported an alarming shortage of low-rent apartments in major cities, the state-owned news service Xinhua reported. Only $593 million had been spent on low-rent housing since the early 1990s, the Finance Minister concluded, and 70 cities weren’t providing any subsidized housing at all. Given that China is now a $2 trillion economy growing at blistering speeds, that is a problem that demands a serious look by the government.

    The real high-wire act that Hu’s government faces is how to gently simmer down the property market without over-reaching and triggering a nasty correction. Going after the speculative excesses makes sense, and to its credit, the central government has been trying to do so since 2003. The trouble is local government regulators have blithely ignored entreaties from Beijing. For instance, a law on the books designed to penalize speculators who hoard land (yet don’t actually develop it) is rarely enforced. If Hu’s team can get this right, it would shore up the government’s street credentials with the masses. A robust and stable housing market and increased home ownership would also have a healthy economic multiplier effect for industries such as home appliances and various service industries. The Chinese are no different than Americans, Japanese, and Europeans in this respect: Buying a home is the purchase of a lifetime and a major financial asset. And if that opportunity is out of reach for too many families, the political blowback could be very nasty indeed.

    One aspect of urban housing inequalities is unequal allocation of government investment in housing, which is explained in terms of the three major types of ownership in China's cities:

    (1) Housing under the city bureau of realty management;

    (2) Housing under the management of various production units, including (a) state-owned enterprises, and (b) collectively-owned enterprises; and

    (3) Private housing owned by individuals.
  3. Jai



    Before 1949, most urban housing was private rental, provided by landlords. This was changed through a socialist transformation in the 1950s, in which the majority of properties owned by big landlords where nationalized. Public housing were built by government owned enterprises and institutions (work units) and distributed directly to their employees as part of a comprehensive welfare provision system. Other elements in this welfare system include free education, health care, and pensions.

    The first important housing reforms were implemented in the 1980s where a public housing provision system was established in all cities and large towns. The housing reforms resumed in the early 1990s where house building was carried out by commercial developers rather than public sector employees. Housing privatization was a main element of these reform programs. By 2002, 80 percent of public housing has been sold to its occupiers. The socialist system of public housing and welfare support (supporting the idea of a universal housing benefit system provided through public sector employers) has given way progressively to a new system, which is market based and supports home-ownership. To be more precise, this new, marked-based system focuses on two main areas: (i) support for home ownership for the middle-and-high-income families through financial arrangements (i.e. housing provident fund system, mortgage finance, building affordable housing, and housing subsidy); (ii) support for low-income households through a remodeled social housing provision system.

    Indeed, with the introduction of the market economy, welfare services provided by employers were substantially reduced in order to improve production efficiency. Also, because of the market economy system, house prices started to soar in cities and the gap between the rich and the poor widened, especially in cities.

    The housing policies introduced in 1998 envisaged that about 5 percent of low-income urban families would rent social housing (lianzu fang) from the municipal government. However, its development was very slowly and by 2003, only few provinces had produced local regulations for social housing. Furthermore, in most cities that implemented this policy, fewer than five percent of households actually received some help. One of the requirements for having access to social housing was that at least one member of the households must have local permanent non-agricultural hukou registration for more than five years.

    Subsidized rental housing was seen by many local officials as a temporary measure to solve a short-run problem. However, with increasing unemployment and lack of social insurance, poverty became an issue and the number of households who actually need help was increasing rather than decreasing. In particular, a large fraction of poor living in cities is migrants who do not hold a hukou, and have thus almost no access to formal sector housing market (which is intended to be 100% owner occupied), for a whole variety of reasons including no access to mortgages. As a result, migrants in cities mainly rent in the informal sector.

    The housing reform has led to the fact that the urban poor (most of them illegal migrants) have been marginalized into poor areas and locations while the rich and new middle class have emerged as the key players in the housing market. Although home-ownership and asset building is certainly a better approach than the socialist welfare provision, new problems have emerged, especially with the relative increase of the urban poor in cities. Also, because housing building in the last ten years has been dominated by commercial property developers, new housing estates were built on different standards. This practice results in serious spatial segregation between the new and the old buildings, and between the rich and the poor. Before proposing some recommendations that could alleviate poverty and segregation in China, we would like to expose one of the specificities of China: rural urban migration and the policies that have tried to limit this migration. This is unique to China.

    In fact, most social housing has been sold rather than rented and often sold to non-poor households (i.e. typically above average incomes). Unlike most countries, China regulates internal migration. Public benefits, access to good quality housing, schools, health care, and attractive employment opportunities are available only to those who have a local “Household Registration System,” also called “Hukou”. Instituted in 1958, Hukou requires every citizen seeking a change in residence to obtain permission from the public security bureau. Hukou is effectively an internal passport system that makes the process of moving between or within provinces analogous to the process of moving between countries. Coincident with the deepening of economic reforms, Hukou has gradually been relaxed since the 1980s, helping to explain an extraordinary surge of migration within China. We explain in more detail the hukou system and its consequences in the next section. This increase is relative since, using the World Bank poverty line, income poverty rate in China of migrants is 5.4 percent, urban residents 0.2 percent, and rural residents 10 percent. Furthermore, China has pulled about half a billion people out of poverty over past 25 years.


    A Chinese government think tank has warned that the country's real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent. The subsidized sale of new housing, to generate additional resources for the provision of more housing, also does not look promising. Critiques of the commercialization scheme are quick to point out that the subsidized sale programme places a heavy financial burden on the state that cannot realistically be maintained over a long period of time. Secondly; many enterprises are reluctant to subsidize their employees to buy new housing. The reasons are both political and economic. First, to allocate limited resources to subsidize the purchase of new housing for a few workers could create political turmoil among competing factions on the shop floor. This is something that most factory officials’ are anxious to avoid. Secondly, many enterprises are financially constrained to subsidize their employees. Thus, it is very doubtful as to how extensively the operation of the subsidized sale of new housing can be expanded in the future.

    The outlook for China's urban housing sector does not appear to be an optimistic one. The recent remedial policies provide only temporary relief to the housing shortage problem without challenging the underlying structural factors that have led to it. Both the surge in investment and the commercialization scheme, which are intended to provide more new housing, have actually introduced new, unanticipated inequalities and potential tensions among the urban work force. The problem is still being discussed but little action has been taken to redress the fundamental issues. It is because both the housing investment structure and the rent subsidies are entrenched in the economic system that it will take unyielding political determination over a long period of time to overhaul them. But because of the political and social implications that may follow any attempt to increase rents or to alter the investment structure or the system of rent subsidies.
  4. You ought to be proud of yourself. So clever... What was your point again?
  5. zdreg


    was it necessary for you to quote the entire article? you put yourself in the same boat.
  6. zdreg


    jai -
    why didn't you post a couple of paragraphs with a link?
    why don't you summarize the main points of the articles and what it says for the future of china.