Introduction

This chapter presents a broad overview of income and its distribution in China based on the findings of the CHIP survey of households for 2002 and compares them with the findings of the earlier CHIP surveys of 1995 and 1988. The present survey, like its predecessors, has generated some surprises. Chief among them is the finding that, contrary to expectations, income inequality actually declined somewhat between 1995 and 2002 in both city and countryside, taken separately. Due to a still-expanding gap between average urban and average rural incomes, however, the Gini ratio for urban and rural income taken together remained unchanged from 1995.

This third round of the CHIP survey in 2002 was the first time that a separate survey of migrant households was carried out. This provides an opportunity for the first time to get a more comprehensive picture of income and its distribution in urban China and China as a whole including the migrant population in urban areas. We find that migration had definite effects on income distribution, increasing urban inequality but slightly reducing inequality in the overall national distribution of income, and that it helped ease the problem of rural poverty. Continued improvement in rural income distribution is likely to require a combination of policies, including improvement in farm factor productivity, promotion of nonfarm activities in the countryside while improving access of the poor to them, and continuing support for an orderly outflow of rural labor.