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Cathy Holcombe

The rich are different then you and me. This could explain why authorities are worried that if a proposed cross-border sailing scheme between Guangdong and Hong Kong is launched, private yacht owners will make a sideline of smuggling stuff, even pregnant women.
“How would the authorities prevent pregnant mainlanders from visiting Hong Kong or smugglers going to Guangdong via private yachts?” Sunny Tao, a senior yacht salesman with Simpson Marine, was quoted in this paper as saying.
Sounds a bit of a stretch, but then keep in mind the latest title of Oxfam’s annual global wealth report: “Wealth: Having It All And Wanting More.”
Released to coincide with discussions at the World Economic Forum in Davos last week, Oxfam’s research shows that the world’s richest 1 per cent have seen their share of global wealth increase from 44 per cent in 2009 to 48 per cent in 2014, and at this rate will be more than 50 per cent in 2016.
China’s wealth gap is technically among the world’s highest, but as development spreads to the inland provinces, the country’s very high Gini coefficient, a measure of inequality, is predicted to decline.
“One can be optimistic: there are strong forces that may curb [Chinese inequality] in the future. We already see some first signs of it: from rising wages to the demand to extend the social safety net beyond urban state-sector workers,” the economist Branko Milanovic wrote in the Harvard Business Review early last year.
Indeed, income inequality has been declining in recent years in China, as wages for blue-collar jobs have been rising faster than wages for professional jobs.
But the Chinese economy is not providing enough opportunity to soak up the many millions of college graduates who come to market every year. As a result, the young professional classes are increasingly resentful about what they see as limited opportunities to make it in modern China. A common complaint is that connections matter more than merit.
“Most Chinese people are not concerned about the Gini coefficient, or the ratio between urban and rural incomes, but rather the gap between the people with connections and the people without them,” Andrew Batson and Thomas Gatley of Gavekal Dragonomics pointed out in a report sometime back.
Such resentment brings the ongoing anti-corruption drive in China into sharp perspective. Many commentators have long warned that greed and profiteering at the top would lead to the downfall of one-party rule in China.
“Dissatisfaction with inequality can easily spill into the demands for political liberalisation,” Milanovic wrote in the Harvard article, pointing out that in China’s case, “the woes of the Chinese politicians are compounded because the gap between the official ideology and reality is huge.”
In one sense, Xi has deftly headed off the inequality resentment with his sweeping “tigers and flies” campaign. Xi’s anti-corruption campaign is a hit, with netizens regularly seen commenting giddily on the demise of rich cadres.
But even if every last bit if corruption were miraculously stamped out, there still remains the question of can China still provide enough jobs for the 6 million college graduates that come to market every year looking for good jobs?
As Peter Fuhrman, a Shenzhen-based investment bank head wrote recently in the Nikkei Asian review: “To go on prospering, China needs to invent a new path and discover a new wellspring of breakthrough innovation, and it needs to do so in a hurry.”
And here other aspects of strongman Xi’s rule might not be helpful to boosting the innovation economy: censorship, disruptions on the internet, anti-foreign firm participation, and weak patent and intellectual property protections among other strong-man type restrictions could prove stifling to innovation.
There are a number of large, successful and very impressive internet companies in China, but one could not say innovation is their forte. A company like Alibaba has prospered in part by copying business models to a China where Western companies are basically barred from entering.
With an economic growth rate in the 7 per cent range, one could hardly say Chinese leaders are poor economic custodians. But many questions still linger about the next stage of economic growth, and the political dissatisfaction that will inevitably deepen if China’s educated classes cannot find high value-added positions to meet their ambitions.


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China needs jobs for graduates and curb resentment about ‘connections’ to get ahead

A pedestrian walks past a woman begging for money in Hong Kong where a fifth of the population is living in poverty. A wealth gap created in part by those with connections and those with not is becoming an issue in China. Photo: Bloomberg


Thousands of graduates throng a job fair in China's Shaanxi province. Income inequality and resentment over those well connected are becoming serious issues in the country. Photo: Xinhua

Opinion

Many commentators have long warned that greed and profiteering at the top would lead to the downfall of one-party rule in China


Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Column

The View

China needs jobs for graduates and curb resentment about ‘connections’ to get ahead

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Many commentators have long warned that greed and profiteering at the top would lead to the downfall of one-party rule in China

Many commentators have long warned that greed and profiteering at the top would lead to the downfall of one-party rule in China