Never Mind the Fiscal Cliff, China is Headed For a ‘Real’ Cliff

By Michelle Yu

China is dangerously close to a catastrophic political, economic, and social meltdown, according to a Chinese business scholar, who cites China’s growing income gap as one of its serious crisis indicators.
According to two recent reports, China’s Gini coefficient, which measures income inequality, has been above 0.6 for the past two years, far exceeding the international alarm level of 0.4.
One report, released on Dec. 9 by the Chinese Household Finance Survey Center of Chengdu’s Southwestern University of Finance and Economics (SUFE), cited a 0.61 Gini coefficient based on a 2010 survey of 8,438 Chinese households. The report also said that such an enormous income gap as exists in today’s China is a rarity in the world. The United Nations estimates that a Gini coefficient of 0.4 and above may lead to social unrest.Another report published by Hong Kong’s Cheng Ming Magazine in November said China’s Gini coefficient was 0.613 during the first half of 2012.

China’s Gini index may even be higher than 0.613, according to Dr. Tianlun Jian, a specialist on China’s economy and an Epoch Times commentator. “We all know that the Chinese society is deeply polarized [between rich and poor],” he told New Tang Dynasty (NTD) Television.
Dr. Frank Xie, who teaches business at the University of South Carolina, Aiken, said in a recent article that he expects China’s GiThe income gap is just one of many signs suggesting that China is close to a meltdown, according to Xie.

Xie estimates that there were over 200,000 mass incidents in China in 2012. “While the world has closely watched for the ‘fiscal cliff’ in the U.S., people should realize that China is rushing over the edge of a real cliff of a political, economic, and social crises,” Xie said. “It means big trouble for the world.”

Another notable factor is high unemployment rate. The SUFE study suggests that China’s national unemployment rate was 8 percent in July 2011, suggesting an unemployed population of 27.7 million, which is almost twice as high as what authorities have admitted to. The unemployment rate doubles for 51-55-year-olds, reaching 16.4 percent, and is attributed to mergers and standardized bankruptcy of state-owned enterprises in the early 2000’s. (An explanation of mergers and standardized bankruptcy are available here  and here.)


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