Between 1978 and 2015, China moved from a poor, underdeveloped country to the world’s leading emerging economy. Despite the decline in its share of world population, China’s share of world GDP increased from less than 3 per cent in 1978 to about 20 per cent by 2015 (see Figure 1). According to official statistics, real national income per adult grew more than eightfold between 1978 and 2015. While average national income per adult was approximately €120 per month in 1978 (expressed in 2015 euros), it exceeded €1000 per month in 2015 (see Figure 2). Annual per adult national income rose from less than 6500 yuans in 1978 to over 57800 yuans in 2015, i.e., from about 1400 euros in 1978 to about 12500 euros in 2015 — these amounts are expressed in 2015 yuans and euros using the latest purchasing power parity estimates.

Figure 1. China’s share in world population and GDP, 1978-2015

Figure 2. The rise of per adult real national income, 1978-2015 (2015 yuans)

Note: National income divided by adult population. National income = GDP – capital depreciation + net foreign income.

However, relatively little is known about how the distribution of income and wealth within China has changed over this critical period. That is, we do not have consistent estimates of the extent to which the different income and wealth groups have benefited (or not) from the enormous macroeconomic growth. The household surveys that are used to study distributional issues in China (e.g., Piketty and Qian, 2009) suffer from massive under-reporting, particularly at the top of the distribution, and are typically not consistent with the data sources that are used to measure macro growth (namely, national accounts). This is an issue of tremendous importance not only for China and its future development path, but also for the rest of the world and the social sustainability of globalisation.

Wealth accumulation (1978-2015)

In the current research, we combine official and non-official sources (including independent estimates of China’s balance sheets) to provide the first systematic estimates of the level and structure of China’s national wealth since the beginning of the market reform process. (See, e.g., Li Yang et al, 2013a, 2013b, 2015; Ma et al, 2012; and Cao et al, 2012.) We find that the national wealth-income ratio has increased from 350 per cent in 1978 to 700 per cent in 2015. This increase is mainly driven by the increase of private wealth, which went from 115 per cent to 487 per cent of national income during the same period.

Read the rest of the article at London School of Economics Business Review