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Tackling inequality in Asia and China

The development sector has recognised for some time that in growing economies, poor families still get left behind. Now this understanding is having more of an influence on the kind of projects which will receive funding.

This week, the Asian Development Bank (ADB) announced it would be shifting its focus away from infrastructure projects to supporting health and education programmes. The aim of this new focus is to counter the threat of rising inequality in some developing nations.

China is just one example of an Asian economy which has recorded impressive economic growth in recent decades. However, as in some other Asian countries, the gap between the rich and poor has been widening. China’s Gini coefficient, which measures income disparity, rose to 0.474 in 2012. This measurement is higher than the 0.4 level which analysts quote as a common threshold for social unrest.

The leaders of China recognise this concern stemming from the growing divide between rich and poor. They have therefore approved a plan to tackle the problem. Measures will include an increase in the minimum wage, which will rise to 40% of average urban salaries by 2015, and a greater share of profits from state-owned firms going towards the social security fund. The new plan also includes steps for improving health care and boosting the income of farmers.

Many of China’s poorest families live in rural areas and work on the land. Around 130 million rural inhabitants were categorised as ‘poor’ in China in 2011, having a per person income of less than 400 dollars annually. China’s leaders hope the proposed measures will lift around 80 million people out of such poverty.
However, bridging the gap between China’s wealthy urban classes and its poor rural residents will be no simple task. Speaking to The Guardian, one Chinese economist said that the new measures still put “more weight on income growth than on income distribution”. Chinese officials themselves admitted that there was no quick way to accomplish income distribution “overnight”.

Nevertheless, developments in areas such as health are seen by many experts as an essential component to improving the lives of China’s rural poor. So the World Health Organization says that China’s voluntary rural health insurance scheme has helped reduce out-of-pocket spending by the poorest and provided some protection against the impoverishing effects of illness. As a spokesperson for the ADB declared, social protection through health insurance helps to reduce inequality by making sure people are “well enough to benefit from growth”.

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