Wealth accumulation and wealth distribution in urban China∗

Under socialism it was neither possible nor necessary to accumulate significant levels of personal wealth. The acceleration of economic reform in the last decade has brought dramatic increases in income and investment opportunities. At the same time, it has also reduced social protections provided by the state welfare system. As a response to these changes urban average household net total wealth has increased by 24 per cent per annum from 1995 to 1999. There is a great concern, however, that those accumulating wealth are economic and political elites while those unable to accumulate wealth are the most vulnerable workers who are also losing social protections. In this paper, I analyze Chinese urban survey data from 1988, 1995, and 1999 to investigate this issue. It is found that households with above average income have accumulated much more wealth than their poorer counterparts. In addition, a larger proportion of this wealth accumulation may be from non-economic means, such as buying larger and better housing at highly subsidised price, receiving more gifts or even monetary bribes. Furthermore, party members and their children have benefited a great deal in this fast wealth accumulation process. Despite these, the poor and vulnerable have also been able to accumulate wealth.