China’s rich-poor gap growing: ADB

China had Asia's second-biggest and second-fastest- growing wealth gap since the 1990s, exceeded only by war-wracked Nepal on both counts, the bank said in an annual survey. India stands on a somewhat honourable seventh position in the list of bad performers issued by the Asian Development Bank.

Relative inequality, which measures the proportionate income differences in different levels of a society, grew by nearly 7% in the 1993-2004 period in China in terms of Gini coefficient. In India, the rise was 4% during those ten years, the ADB said while releasing its flagship Key Indicators 2007.

Interestingly, poorer countries like Pakistan and Philippines have done better than India in terms of inequality. Thailand has the most impressive record in Asia. It has reduced inequality by over 5%, while Indonesia and Malaysia have also managed to reduce inequality to some extent. The rising inequality in India and China needs to be seen in the context of achievements in Thailand, Malaysia and Indonesia.

Ifzal Ali, Chief Economist at the Bank, has cautioned that growing inequalities all over Asia would weaken social cohesion.  In fact, China has already been witness to thousands of protests in recent years over land seizures and other economic grievances. There is also a danger that the rich will capture the policy levers for their own benefit and weaken the institutional foundations of the growth process.

Ali said it was inappropriate to speculate when asked whether China should expect worse unrest. But he pointed to the experience of Nepal, where he said the recently ended decade-long civil war was most intense in areas with the highest inequality.

However, ADB is opposed to any kind of move towards rolling back the process of market-oriented reforms and international integration. Instead, Asian governments should come up with complementary policies that can counter the negative distributional impacts of market-oriented reforms. Social protection mechanisms and skills and training programs could be considered as examples of complementary policies.

There is also a need for partnership between the public and private sectors to develop new economic activities and industries that generate new employment opportunities for the poor. Asian governments also need to focus on "radically improving the quality of basic health care and education available to Asia's disadvantaged," the report said.

Resource: The Times of India
Released on: 9 Aug 2007
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