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'Unique' China defies world's predictions
By Xu Binglan (China Daily)
Updated: 2004-06-21 08:32

(Continued)

China Daily: In 1997, you published Report China 2020. The report predicted that by 2020, China could have the same wealth level as Portugal in 1997, which means reaching a per capita gross domestic production of about US$10,000. Is this prediction still valid?

Huang: Yes, it is still on track, all it has to do is to grow by 7 per cent. The result is still quite robust. Despite the Asian financial crisis, despite SARS (severe acute respiratory syndrome), China is still on track. If you think about the seven years, the Asian financial crisis really got people worrying about China. There was debate about whether China needed to devalue, should it stimulate its economy amid a world recession?

It also recovered from SARS a year ago. People worried about whether China could recover from SARS, would foreign investment disappear? Would production be moved to other countries? Would people in China be scared of travelling? There was five or six months where people were really worried. And when SARS was over, it rebounded really fast. It is surprising how rapid the recovery has been.

China Daily: Does the widening wealth gap in China bother you?

Huang: When I came here, people were not worried about inequality. China's Gini coefficient, which is used to measure inequality, was much better than Asian levels, much better than most developing countries.

Today, it is over 40 per cent. That is normal for many Asian countries and it is still lower than some of the Latin American countries.

But it doubled over the last 10 or 15 years. No country has changed that magnitude of inequality so quickly.

So the problem of China is not so much that income is so unequal. By global standards, it is actually normal. It is that the change has been much more rapid than any other country.

So the question for Chinese policy makers is whether society can tolerate such a rapid change, whether the country has a system to cushion the people, to soften the widening inequality.

In most of the countries, inequality takes place over 20 years, 30 years. You have time to create institutions. So people are not bothered. But it has occurred so rapidly, over 10 years. Institutions are not strong enough to deal with this.

By institutions I mean, for example, health insurance schemes that help the poor, relocation schemes for the unemployed, retraining systems, unemployment insurance, job search facilitation. I think the big challenge is also how do you deal with the social discontent. Because you don't have the experiences or history and institutions, but you have to deal with it very quickly.


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