Amid luxury cars and striking lorry drivers, China's inequality on show

The wealth gap in China threatens to pose a serious problem to the Beijing government.

While China's nouveau riche were talking engine sizes, turbochargers and leather seats in the brightly lit exhibition halls, those in the other end of the wealth spectrum are hard-pressed survive.

For those looking for a touch of luxury, there was no shortage of sumptuous cars to drool over at Auto Shanghai 2011 in mainland China's business capital.
Maybach, a luxury brand owned by Mercedes-Benz, had two special-edition saloons that reportedly sold for a cool 13.9 million yuan (Dh7.8m) each.
Another show-stopper was the venerable British maker Rolls-Royce, owned by BMW. The ultimate luxury brand unveiled a stretch version of its Ghost saloon for those wanting a bit of extra legroom.
The starting price of the Ghost was a relatively modest 5.1m yuan, so it was perhaps no surprise that four of them were said to have been sold on the show's preview day. Two of Rolls's larger Phantom saloons were also sold.
But for those with serious cash to splash, the car to have was Aston Martin's One-77, a beast with a 7.3-litre engine producing 750 brake horsepower. Despite the 47m yuan price, a One-77 was apparently sold before the show began.
While China's nouveau riche were talking engine sizes, turbochargers and leather seats in the brightly lit exhibition halls, elsewhere in Shanghai a very different group of motorists was attracting attention.
Lorry drivers, already struggling to make ends meet after repeated diesel price increases, were blockading port facilities over increased service charges.Many owner-drivers are said to be looking to sell their vehicles because in real terms their incomes have fallen, especially with diesel now as much as one third more expensive than in 2008.
Given the strikingly different financial fortunes of the hard-pressed truck drivers and the spendthrifts at the motor show, it is no surprise that recent research shows inequality in China is rising.
A Beijing study from the Chinese Academy of Social Sciences, reported in the state-run Global Times, found average pay for the capital's workers was a modest 26,800 yuan in 2009, with 70 per cent of people taking home less than 30,000 yuan a year.
Without specifying the criteria used, the report said the income ratio between the richest and poorest groups in the city had grown from 3.74 to 1 in 2006, to 4.33 to 1 in 2009.
The findings tie in with repeated suggestions that in China the Gini coefficient, a measure of the level of income inequality, has grown in the past decade. With nought representing no income disparity, and 1 indicating extreme inequality, the coefficient is said to become a cause of concern when it exceeds 0.4. Although there are no official figures, China's Gini coefficient is believed to be about 0.47.
Despite signs last year that some of China's more poorly paid factory workers were being awarded significant pay rises amid a tightening labour market, the authorities remain concerned about the consequences of rising inequality, especially with inflation at about 5 per cent and food prices going up at more than twice that rate.
Last month, Wen Jiabao, the country's premier, acknowledged more must be done to achieve a more equitable society, warning of threats to "social stability".
"Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possible and ensure that the people share more in the fruits of reform and development," Mr Wen said.
While official figures are hard to come by, "the people realise the situation is very bad", says Wang Jianmao, a professor of economics at the China Europe International Business School in Shanghai. Prof Wang partly blames China's model of development for the extent of inequality.
"The emphasis so much is, for example, on manufacturing and investment [but] services are underdeveloped," he says. "We ensure that capital can always get very high returns. We fail to generate enough jobs. That has suppressed the labour income."
While in the cities there is an income gap between many of China's 230 million migrant workers and the better-off locally registered residents, a key factor in inequality is the urban-rural divide.
The vast disparity in income between rural and urban residents is "only going to grow", says Tom Miller, a managing editor at the consultancy GK Dragonomics in Beijing.
According to GK Dragonomics's figures, in 2000 the disposable income of the average urban dweller was 4,000 yuan a year more than that of his typical rural counterpart. That disparity is now 13,000 yuan.
While more people are moving to the cities, leaving those who remain to farm larger acreages, this trend is unlikely to eliminate the urban-rural income gap.
But the authorities have, as Mr Miller points out, made efforts to reduce the disparity. Those efforts include abolishing the land tax, which dated back hundreds of years. Farmers now also have improved benefits such as healthcare coverage.
For all of the disparity in incomes, Mr Miller insists China's rural poor are much better off than their counterparts in, say, India, where education is patchier. China's literacy rate is about 94 per cent, while India's is about 66 per cent.
"There is social mobility [in China]," Mr Miller says. "If you're born poor in India, there's very little you can do. You're likely to be malnourished, which is not the case in China. You will be lucky to get schooling. In China you will have schooling. You will have life opportunities."
Corruption, however, remains a major obstacle in efforts to reduce inequality and public anger over what some perceive as an unfair society. "If the corruption problem cannot be solved, I would not expect any significant improvement with income disparity," Prof Wang says. "If you're an entrepreneur, you're creating value and you have a high income.
"Many people, they're not creating value, yet they still have a high income. You do speculation, or you're a corrupt official or businessman. You can get a lot of money without creating value."
As for the rich at Auto Shanghai 2011, they were just out to buy the latest must-have luxury brands.
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