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Wealth Gap
August 8, 2007

ADB: Asia's rich-poor gap widening
The gap between rich and poor in China and other Asian countries is growing, possibly fueling unrest, the Asian Development Bank said in a report on August 8.

China has 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.

China has seen thousands of protests in recent years, some of them violent, over land seizures and other economic grievances blamed on the growing gap. The communist government has made improving incomes for the poor a priority, warning last year that inequality has reached "alarming and unacceptable" levels.

"High inequality, particularly high absolute levels of inequality, leads to a disruption in social cohesion. You could have street demonstrations which could lead to violent civil wars," Ifzal Ali, the bank's chief economist, said at a news conference.

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

Tensions over China's growing gap between an urban elite, who have profited most from two decades of economic reform, and the poor majority are a key political issue for communist leaders. They have promised to spread prosperity by spending more on social programs for the countryside and the urban poor.

Ali said China's poorest people have benefited from its boom — which saw the economy expand by 11.9% last quarter — but incomes for the richest 20 percent have grown much faster.

Cambodia, Sri Lanka and Bangladesh also saw rapid growth in the gap between rich and poor, the bank's report said. China's Gini coefficient, a measurement of inequality in income distribution, was 47 in 2004, the most recent year for which figures were available, up from 40.7 in 1993, according to the bank.

That brought China close to the levels of Africa and Latin America, which have the greatest inequality, Ali said. The Gini coefficient for the United States in 2000, the most recent period available, was 40.81, according to the World Bank's World Development Indicators Online.

The growing wealth gap is a byproduct of globalisation, which has brought higher incomes to urban, skilled, English-speaking workers in China, India and other countries, the bank's report said.

It said the gap could slow the spread of prosperity, because the poorest people have less access to education, health care, bank loans and other things needed to benefit from economic growth.

"Increasing inequality lowers the impact of economic growth on poverty reduction," said Ali.
"We have to invest in creating opportunities, as well as investing in broadening access to opportunities."  


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