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An important issue that one should take into account in the case of China is the increadibly large size of the country's working class and the small size of the middle class. So the income gap between the poorest 40 percent and the next 40 percent is rather small - the second 40 percent earn "only" 1.8 times more than the first 40 percent. This looks like a huge gap compared to many developed economies, but it's rather small when compared with the gap between the poorest 90 percent and the richest 10 percent, which is official at 300 percent and inofficiall even bigger, as many wealthy people hide their incomes from the government in China (due to corruption and the like). |
So if you're member of the richest 10 percent, you can afford an appartment in the cities - but for the poorer 90 percent, it's gonna be tough. However, 10 percent of China's population are still a huge number of people - it's half of the US' population and still enough to populate many huge cities.
Another issue is of course the rural-urban development gap. I am a strong opponent of China's urbanization policy, as I believe that it does not only increase socialeconomic tensions but also harms the country's development in the long run, as it stops provinces from building infrastructure in rural areas which prevents foreign companies from investing in China's countryside now, that salaries are much lower there than in the cities. Not to mention the resulting welfare loss and decrease of living standards plus all the psychological health issues children get from growing up alone as their parents have to work in cities, leaving families destroyed.
Moreover, it also harms the development of a harmonious society as rich and poor are much closer in cities than in rural areas. A farmer doesn't care about rich people - they exist, but they don't matter to him. But in cities, you are either rich or suffering - and thus experiencing much more preassure.
I'd therefore advice China to finally stop this urbanization frenzy and give people opportunities to live a good life on countryside. When there are not so many people moving to the cities anymore, demand for real estate will decrease, supply can catch up and rents and prices fall to a reasonable, affordable level. That would make things better for all Chinese (except for the real estate developers and owners - they of course like high real estate prices).