Study estimates China's rich hiding USD 1.4 trillion

Study estimates China's rich hiding USD 1.4 trillion

The estimates also offer a troubling indication that the income gap between China's rich and poor is much wider than official figures suggest.

The Credit Suisse-sponsored report, issued this week by the economic think tank China Reform Foundation, attempts to calculate total real earnings based on spending patterns of about 4,000 households.

The report estimated that average urban incomes were actually about 32,000 yuan (USD 4,700), or nearly double what has been officially reported.

"Gray income" can come from a variety of sources, including kickbacks on projects, stock market manipulation, land deals, bonuses, and even wedding gifts to powerful officials. It represents a loss to the country in unpaid taxes that could be used to fund social services and infrastructure.

The survey used unusual methodology to gather information, surmising that high-income families would be unlikely to be truthful regarding their hidden earnings.

The researchers contacted family members, friends and colleagues of a household's main income earner to get data on spending habits from a sampling of about 4,000 households in 64 cities and 19 provinces. They also looked at things like car and property ownership.

The researchers then analyzed the data using economic formulas designed to project actual income from the spending figures.

About 62 per cent of the total hidden income is in the hands of the richest 10 per cent of Chinese society, according to the report, headed by economist Wang Xiaolu.

Together, the top 20 per cent of society control about 80 percent of that often-illegal income.

The report also estimated that average per-capita income for the richest 10 per cent was 65 times higher than the bottom 10 per cent of society, instead of the figure of 23 times cited in the government's official household income survey.

"The existence of hidden income has expanded the income gap remarkably, in our opinion," the report concluded. "The widespread existence of gray income has significantly distorted national income distribution and reveals the lagging development in social reforms compared with economic reforms."

China's leaders have shown increasing concerns over the disparity in income, fearing threats to the country's social stability that could threaten the Communist Party's 60-year rule.

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