Table of Contents
The level of people’s lives usually varies even regardless of the economic prosperity. While the GNI of the country may be quite high, it does not guarantee the overall satisfaction and equality of the citizens. The distribution of the income among people is the factor that predetermines inequality level and shows the availability of resources to various population layers. Although it is widely known that the economy of China survived considerable economic growth, it absolutely does not mean that the life of all Chinese people has improved. In fact, such indicators as GNI/PC/PPP, HDI, Gini coefficient, and HPI should be used to analyze the situation. Even though the GDP and GNI of the country are quite high, the development of the Chinese economy is not accompanied by the equal income distribution. Moreover, the indices mentioned above neglect some issues that reduce the life level of many Chinese. The country’s economy faces a number of problems including internal inequality and environmental problems that detain it from the further effective development.
The current paper will analyze the economic situation and inequality level with regards to four main measurements, such as gross national income per capita in purchasing power parity (GNI/PC/PPP), human development index (HDI), the Gini coefficient, and human poverty index (HPI). These indices should become the basic measures of inequality existing in the country. Hence, there are solid reasons to provide clear understanding of how they reflect the income equality in the country.
GNI is a GDP including net receipts of the primary incomes of the citizens that they may get from abroad. In such a way, it is counted as summarized incomes of all residents and producers on the territory of the country. This value is divided by the population number to get the GNI per capita (Trading Economics, 2016). Besides, PPP GNI per capita is used to estimate the average income of residents with regard to purchasing power parity rates. This measure always needs to consider the local exchange rates and the existing levels of prices. Hence, there is a direct correlation between the PPP GNI per capita and the level of living standards in the country. However, there are no evidences that such amounts of income are equally distributed.
The next index is HDI. It is used to indicate the development level of residents. Accounting for the economic and social factors, it is calculated on the basis of GDP per capita, life expectancy, and literacy. In such a way, it is aimed to reflect the well-being, education level, and living standards in the society (UNDP, 2015). To calculate it, the arithmetic mean of the abovementioned indices is defined. Consequently, HDI is higher in more developed countries. However, it shows the mean level throughout the country and fails to reflect whether such development rates are equally distributed in the country. Therefore, it is necessary to refer to the measures that are more effective to reflect the equality, not only the mean numbers for the country.
Gini coefficient is a widely spread measure to reveal the difference in the national income equality. It is a number between 0 and 1. Out of such numbers, 0 means perfect equality and equal income. Correspondingly, 1 means the highest income of only one person and no income for others. To understand Gini coefficient, the Lorenz curve is taken as a basis. This curve is the “line of equality” that shows the same income among the residents (Trading Economics, 2016). The further the Gini curve is placed from this line, the more unequal the distribution of the incomes is. Hence, the area under the line reflects the number of the poorest people throughout the country.
Another measure reflecting the equal income distribution is human poverty index. HPI calculation is based on life expectancy, literacy level, the number of people living below the poverty line, and long-term unemployment rate. Life expectancy is calculated by the mean age of living; knowledge shortage is defined by the amount of the literate residents; life standard is measured by such variables as access to safe water, medical care, and underweight children. For the countries with high income, it can also consider the social exclusion indicator. However, according to the WTO and the World Bank Data (2014), China is still considered as a developing country.
Regarding poverty and equality in the country, one can also used MPI, a multidimensional poverty index. As an indicator of household living levels, it distinguishes poor and non-poor according to the household deprivation (UNDP, 2015). The score of more than 50% means severe multidimensional poverty, 33% percent is defined as multidimensionally poor, 20 - 33.3 % as near multidimensional poverty.
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Measures for China
According to the World Bank Data (2014), the income of the country is estimated to be upper middle. China is the second largest exporter of goods in the world and has $7,400 GNI per capita, which is growing yearly (WBD, 2014). PPP is also growing and was estimated as $18.09 trillion in 2014 (Central Intelligence Agency, 2014). Concerning the GNI per capita, PPP in China was $13.130 in 2014 (Trading Economics, 2016). The numbers reflect the high level of the country’s development and financial flows. Hence, one can interpret that the sum of value added by all Chinese resident producers is upper middle and reflects the development of the Chinese economy.
Regarding the Human Development Index, it was represented by UNPD as 0.719 in 2014. This index is based on the following measures. The adult literacy in China is quite high and reaches 95.04%, and the life expectancy is 75.2 years (UNDP, 2014). The GDP per capita in China was constantly growing and reached 3865.88 US dollars in 2014 (Trade Economics, 2016).
Income Gini coefficient in the country is 0.47 (UNDP, 2014). This indicator reflects high deviation from the equality line or Lorenz curve. Hence, the income distribution in the country as well as the consumption expenditure varies depending on the area or some definite characteristics of residents. With the index of 0.47, almost a half of the income is distributed unequally. Hence, the situation in China is far from perfect equality. To analyze the indexes that explain the situation, it is necessary to refer to the poverty and unemployment measures.
In China, the number of population living below poverty line reached 6.1%, while the unemployment rate was 4.1% (Central Intelligence Agency, 2014). Even though these numbers cannot be considered as high and are much lower than in the previous years, life in the country is still not perfect. Human poverty index that measures such elements as life expectancy, shortage degree of knowledge, and decent life is quite low. According to MPI, China has 5.2% of multidimensionally poor population and 22.7% of people living on the verge of multidimentional poverty (UNDP, 2015).
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The abovementioned measures reflect the state of development of the country and its achievements in relation to to the economy, literacy, well-being, and life-expectancy. However, these measures do not show that China’s rapid economic development has brought considerable harm to the environment. Even though the HPI is based on such aspects as safe water and medical care, it does not directly reflect the existing environmental problems in the country. To reveal such effects, it is necessary to refer to health indicators and pollution levels in the country. The reports of Nielsen & Ho (n.d.) emphasize that 3 – 7.7% of the Chinese GDP has to be spent to tackle the problems of air and water pollution in the country. Even though such pollution may not directly reflect on life expectancy of the current generation, it will have negative influence on this index in the future. Nowadays, the air pollution in China overcomes the WHO levels 50 times (Birtles, 2015). Hence, it obviously influences the well-being of people and quality of their lives. However, it is not reflected in GNI or GDP index. In fact, this is the major problem, which is not reflected in the abovementioned measures.
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The measures weakly reflect regional disparities in the country. Even though the Gini index and MPI show unequal income distribution, one needs additional research to define reasons and particular areas that suffer from poverty more greatly (Xie & Zhou, 2014). Income inequality is reflected in Gini index, but it does not show that the area of living predetermines the disparity. For example, the reports of UNDP inform that 157 million of rural inhabitants live on less than 1.25 USD per day (UNDP, 2014).
In conclusion, on the basis of GNI/PC/PPP, HDI, Gini coefficient, HPI, and MPI, China has reached quite high levels of development. However, these indicators also show that the high GDP and GNI are equally distributed among the residents. While it is necessary to refer to such issues as inequality and poverty, the government should analyze the underlying reasons of the inequality. Moreover, it is crucial to consider environmental pollution measures in more details in order to define their influence on health and life expectancy of the future generations, hence internal inequality and environmental problems that detain it from the further effective development.