Capital Accumulation, Private Property and Rising Inequality in China, 1978-2015

Abstract

This paper combines national accounts, survey, wealth and fiscal data (including recently released tax data on high - income taxpayers) in order to provide consistent series on the accumulation and distribution of income and wealth in China over the 1978 2015 period. We find that the aggregate national wealth - income ratio has increased from 350% in 1978 to 700% in 2015. This can be accounted for by a combination of high saving and investment rates and a gradual rise in relative asset prices, reflecting changes in the legal system of property. The share of public property in national wealth has declined from about 70% in 1978 to 30% in 2015, which is still a lot higher than in rich countries (close to 0% or negative). Next, we provide sharp upward revision of official inequality estimates. The top 10% income share rose from 27% to 41% of national income between 1978 and 2015, while the bottom 50% shar e dropped from 27% to 15%. China's inequality levels used to be close to Nordic countries and are now approaching U.S. levels.