Is getting rich still glorious in China?

By Michal Meidan

Most Chinese are growing old before getting rich. The country’s census results, published last week, show that of the country’s 1.4 billion people, the number of those over the age of 60 ballooned by more than the population of Spain in a decade. Thanks to China’s one-child policy, children under the age of 14 make up less than one-sixth of the population. This leaves the country’s modestly paid working class to support two parents and four grandparents each, and taking care of one’s elders can be dauntingly expensive for the average worker. The small upper class, meanwhile, is splurging on mansions. For a regime that bases its political legitimacy on economic wellbeing, a GINI coefficient nearing 0.5 (which puts China’s income inequality on par with that of countries such as Sri Lanka) is a ticking time bomb.

Despite the nail-biting in Beijing about the potential consequences of inequality, the income gap is set to persist, partly because wealth is concentrated in the hands of the political elite. Many of China’s new millionaires are the offspring of top officials, and other moguls have emerged from the ranks of state-owned firms. Since the beginning of the global financial crisis, the state has only tightened its grip on economic power. Private entrepreneurship is shackled, and the road to riches is closed to many. Young college graduates often earn just a fraction more than migrant workers do and have little hope of buying property, let alone the Ferraris they see in the streets of Shanghai.

So how should Beijing respond to its people’s expectations and to the frustration that inevitably arises when dreams go unrealized? China’s top leadership has yet to reconcile Maoist notions of equality with Deng Xiaoping’s notion that "getting rich is glorious." In the meantime, Beijing will shift its emphasis from growth to development and do its best to make households richer. It is spending more heavily on welfare schemes and social safety nets and is mandating wage hikes across the country — all of which will give workers a little more pocket money and ease the burden of supporting relatives. Officials have also begun introducing curious measures to prevent the less fortunate from realizing their increasingly less fortunate circumstances, including banning "lavishness" in advertising and restricting the size of tombstones.

This will keep resentment at bay in the near term, but social tensions are bound to rise as China muddles through its ideological crisis. To prevent them from bubbling over, Beijing will have to forge some sort of compromise: both expanding the Chinese Dream to include more people and broadening the sources of its own legitimacy.

Michal Meidan is an analyst in Eurasia Group’s Asia practice.