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Reviewed by:
  • China's Retreat from Equality: Income Distribution and Economic Transition
  • Kristen Parris (bio)
Carl Riskin, Zhao Renwei, and Li Shi, editors. China's Retreat from Equality: Income Distribution and Economic Transition. Armonk, New York: M. E. Sharpe, 2001. vii, 358 pp. Hardcover $85.00, ISBN 0-7656-0690-9. Paperback $32.95, ISBN 07656-0691-7.

When the Chinese Communist Party first inaugurated its reform program in 1978, China was one of the most egalitarian countries in the world. Two decades later, even the most casual observer is struck by the glaring gaps in income and wealth that have developed in China during this period of rapid growth and change. By the mid-1990s China had become one of the "more unequal countries in its region and among developing countries generally" (p. 3). This new book edited by Riskin, Zhao, and Li contributes to a growing body of recent research on the Chinese economy that is focused on analyzing the changing distribution of household income and delineating the patterns and causes of "China's retreat from equality."

China's pattern of development, interesting in itself, also represents an opportunity for an in-depth examination of the more general relationship between growth, liberalization, and inequality. Such an examination can provide insights into one of the key debates in contemporary economic theory and practical politics: do growth, liberalization, and globalization bring efficiency, equity, and shared prosperity, as proponents of liberal economic theory hold, or do they dramatically increase inequality and poverty, as many critics have argued?1

Taken together, the careful studies in this book suggest that there is no simple, generalizable answer to this question. While reform policies have reversed, and indeed were intended to reverse, what was considered China's excessive and artificial egalitarianism, the rapidity and extent of the increase in inequality and an attendant decline in poverty reduction have been exacerbated, if not caused, by what Zhao calls "policy inertia" in the traditional planned economy. This includes a regressive system of taxes and fees, restrictions on migration, and the highly de-equalizing pattern of government subsidies and benefits. Thus, as contributors Knight and Song argue, there may be no stable relationship between these dynamics; rather, initial conditions and specific government policies are as important for understanding patterns of distribution and poverty as are rates of growth and the extent of liberalization (p. 85).

Written by a team of economists from China, Europe, and the United States, the studies in this book are based on two national surveys for the years 1988 and 1995, designed by the authors under the auspices of the Institute of Economics at the Chinese Academy of Social Sciences in Beijing. The surveys were drawn from the national urban and rural samples used by the Chinese State Statistical Bureau [End Page 522] (SSB) for its own annual household surveys. Using data for 1988 and 1995, the authors adjusted the income estimates in order to correct perceived weaknesses in the original SSB data and to bring them into accord with international standards of household income. In particular, they imputed the rental value of housing, widened the range of subsidies counted as income, and revalued self-consumed farm products. This reappraisal produced significant differences from the SSB data by increasing household income per capita, generating higher Gini coefficients (0.45 as opposed to 0.41 for overall inequality), and revealing no significant increase in the average urban-rural income gap between the two years under study.

This volume is one of a number of recent publications using these surveys. While covering some of the same ground as others, most notably Khan and Riskin's Inequality and Poverty in China in the Age of Globalization,2 it represents a valuable contribution by providing more in-depth and technical analyses of the data within a set of narrowly focused studies. Some of the findings are familiar but important nonetheless: land exercised an equalizing effect on overall wealth distribution because it was so equally distributed, but income from farming was falling sharply as a share of total rural income. The single most important source of increased rural inequality was unequal access to wage income from off-farm employment...

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