China Income Gap is Among World's Widest

China has one of the world's highest levels of income inequality, according to an article published in the Financial Times on Jan. 15, 2016, page 5.

• The richest 1% of households in China own 1/3 of the nation's wealth, according to a report from Peking University. This report is based on a survey of 15,000 households in 25 provinces.
• The poorest 25% of Chinese households own just 1% of the nation's total wealth, according to the same study.
• China's Gini coefficient, a measure of inequality, was 0.49 in 2012, according to the same report.
• Its Gini coefficient was 0.3 in the 1980s.

Separately, the Hurun Report indicates that the number of dollar millionaires in China is 3.14Mn, up 8% over the past year.

According to Hurun's 2015 China Rich List, China has 596 dollar billionaires, which is more than the US.

The World Bank considers a coefficient above 0.40 to represent severe income inequality. In comparison to China,

• Only South Africa and Brazil have higher Gini coefficients at 0.63 and 0.53, respectively.
• In contrast, the figures for US and Germany are 0.41 and 0.3 respectively.

Turning to the US, the Gini coefficient doesn't tell the whole story. 

In the US, the wealthiest 1% of households own 42% of all US wealth as of 2012 (vs. 1/3 for China). This is according to UC Berkeley economist Emmanuel Saez.

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My analysis

Putting things in perspective, since US population is almost 319Mn (as of 2014) versus 1,393Mn (as of 2014) for China, 1% of the population of each country equals 3.2Mn in the US versus 13.9Mn in China. (Source: Google.) There's a factor of 4.4 in difference here.

But we are dealing with household wealth not per-capita wealth, so population is irrelevant.

The number of households in the US was 123.2Mn as of 2014. (Source: Google.) The number of households in China was 455.9Mn but that was as of 2012, not 2014. (Source: Wikipedia.) Google reports the average household size in China as 3.0 as of 2012. Using this figure of 3.0, I'll estimate the number of Chinese households as of 2014 to be 1.393Mn / 3.0 = 464.3Mn. Here, there's a factor of 3.8 in difference. (US households are smaller than their Chinese counterparts: 2.6 people  per household vs 3.0.)

So, 1% of households in US vs China amount to 1.2Mn and 4.6Mn households respectively.

So, we can say the following. 1.2Mn households in the US control 42% of all US wealth whereas in China, 4.6Mn households control 1/3 ie 33% of all China wealth. This statement implies that there's more wealth concentration in the US: You have a fewer number of households controlling a larger percentage of each nation's wealth.

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It would also be interesting to look at the amount of total wealth in each country. Credit Suisse's Annual Global Wealth Report estimates total global wealth at $250 trillion as of June 2015, with the US owning $86 trillion and China at $23 trillion. Here, the difference is a factor of 10 4; (error corrected on June 6, 2016). (Source: Barrons.) 

So, we can say the following. 1.2Mn households in the US control 42% of all US wealth with this 42% amounting to $36 trillion whereas in China, 4.6Mn households control 33% of all China wealth with this 33% amounting to $7.6 trillion.

Using division, in the US, the average wealth per household within the top 1% of households amounts to $30 million per household. In China, the average wealth per household within the top 1% of households amounts to $1.6 million. Here, the difference is 20 times.

Google reports US and China median per-capita income in PPT (purchasing power parity) terms as $53,750 and $11,850 respectively, as of 2013. Here, the difference is 4.5 times. (I chose to work with median per-capita income rather than median household income because I couldn't find data on the latter for China. However, I will note that median household income being $51,939 in the US as of 2013 is very close to the figure I'm using for US median per-capita income, $53,750.)

So, if we adjusted the 20 times difference associated with the top 1% for the fact that median per-capita income exhibits a 4.5 times difference across the two countries, we can say that the top 1% of households in US are 4 times wealthier than their Chinese counterparts, i.e. 20x / 4.5x = 4.4x which is about 4x.

Within each country, we can say the following. In the US, household wealth for the top 1% of households is 558 times median per-capita income (i.e. $30Mn / $53,750) whereas it is 135 times in China (i.e. $1.6Mn / $11,850). Measured this way, the wealth gap is wider in the US than China. On the other hand, the Gini coefficient indicates a larger wealth gap in China than in the US. That's probably because it also takes into account wealth at the bottom end too.

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Takeaways

Gini coefficients by country:

• 0.63 South Africa
• 0.53 Brazil
• 0.49 China
• 0.41 US
• 0.3 Germany

Aggregate household wealth by country:

• $86 trillion US
• $23 trillion China
• $250 trillion World

Average household wealth for the top 1% of households by country:

• $30 million US
• $1.6 million China

Median per-capita income by country:

• $53,750 US
• $11,850 China
• $9,733 World

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