Asset Polarization and Educational Inequality... China's 'Gagaebung' Can No Longer Prevail

Decreased Social Mobility and Increased Inequality
Advanced Country Syndrome Deepens Since Early Development
Growing Distrust and Disillusionment Among Young Generation
Xi Jinping Recently Emphasizes Wealth Redistribution

[Asia Economy Reporter Cho Hyun-ui] As China's economy matures, opportunities for children from low-income families to achieve social mobility are disappearing. This has become a potential source of social unrest in China. It is also the reason why Chinese President Xi Jinping recently emphasized wealth redistribution through "Gongtong Fuyu (共同富裕)" or "Common Prosperity."

The Wall Street Journal (WSJ) reported on the 14th (local time) that "while children of high-income and high-ranking officials in China are increasingly gaining access to good opportunities, those from low-income and rural backgrounds are seeing their chances diminish."

According to research by the National University of Singapore and the Chinese University of Hong Kong, the likelihood of children born into the lower-income bracket in the 1980s achieving upward social mobility was lower than for those born in the 1970s. Among children born into the bottom 20% of households in China between 1981 and 1988, only 7.3% succeeded in entering the top 20%. In contrast, the figure was 9.8% for those born in the 1970s and 1980s.

The lead researcher stated, "The trap of intergenerational poverty has grown larger." The World Bank reached a similar conclusion in related research, noting that "social mobility has decreased in China," and that this is "particularly severe among women and in impoverished regions."

As China has grown into the world's second-largest economy, problems that have appeared in some Western countries have emerged early on. These Western countries generally have developed economies with stagnant incomes. WSJ explained, "Unlike Western countries, China has faced these issues from the early stages of its development."

As social mobility has relatively declined, economic inequality has deepened. According to the World Bank, in 1978, the top 10% income earners in China accounted for 25% of the nation's total income, as did the bottom 50%. However, 30 years later in 2018, the top 10% earned more than 40% of the total income, while the bottom 50%'s share fell below 15%.

Since the 2000s, wealth polarization has become even more pronounced. According to Credit Suisse, in 2020, the top 1% in China held 30% of the country's total assets, triple the 10% share they held in 2000. In the United States, during the same period, the top 1%'s asset share increased by only 2.5 percentage points (from 32.5% to 35%).

Although China's overall income and living standards continue to rise, the relative decline in social mobility has raised concerns within the Chinese Communist Party, which aims to eliminate class distinctions. WSJ reported that "authorities worry that this phenomenon could threaten social and political stability."

Among China's younger generation, there is a sense of disillusionment over the disappearance of the ladder for social mobility. A young man from the northwestern part of Guizhou Province, considered one of the poorest regions in China, said, "The future does not look positive." As the first university graduate in his family, he said, "Climbing the social ladder is considered almost impossible," adding, "The current wage level is enough to live on, but I don't think I can buy an apartment or get married."

WSJ identified two main causes for the difficulty in social mobility. First, as individuals became able to own homes, asset values surged. Those who purchased homes early joined the ranks of the wealthy, enabling them to buy more properties. Conversely, those who did not buy homes early were excluded from the market.

As of June, the average housing prices in Beijing and Shanghai were 25 times and 20 times the annual average real household disposable income, respectively. This is more than three times higher than in London (8 times) or New York (7 times), cities notorious for high real estate prices.

The other cause is educational inequality. Middle-class and above families in major cities spend more than a quarter of their actual income on private education. In contrast, students in rural areas do not have access to such opportunities, leading to educational polarization. Among entrants to Tsinghua University, one of China's prestigious universities, the proportion of students from rural areas dropped from 22% in 1990 to 10.2% in 2016, nearly halving.

In 2017, the top scorer on China's National College Entrance Examination sparked controversy in a media interview by stating, "I was able to succeed thanks to my parents' privilege as diplomats and the educational resources available in Beijing," adding, "Students from rural areas do not enjoy these benefits. Unlike them, I had many shortcuts while studying."

This content was produced with the assistance of AI translation services.