Is It Me or the Economic System? Changing Evaluations of Inequality in China

The Myth of the Social Volcano

Inequality is politically irrelevant.

This may sound like a shocking statement, but on closer inspection, it’s not as crazy a claim as it seems. What matters is not whether objectively there is a larger or smaller distribution of income in a country, but rather how members of society perceive that distribution. It is inequity – a sense of injustice or unfairness about the differences – and not the existence of inequality itself, that has political consequences. This insight applies to China as much as it does to any other country.

In the 1990s and 2000s, as China turned away from state socialism to market reforms, the country grew quickly, but inequality also expanded rapidly. However measured, whether across the population as a whole or regionally, inequality grew dramatically, making China far more unequal than its East Asian neighbors and more similar to the United States and countries in Latin America. (see Figure 1)

As inequality expanded and reports of protests in factories and the countryside increased, the conventional wisdom was that growing inequality was leading to a build-up of pressures akin to a volcano which would eventually erupt and result in major political instability, threatening the Chinese Communist Party’s (CCP) hold on power.

Those expectations were not realized, touching off a huge debate as to why. Some credited China’s “authoritarian resilience” to the growing institutionalization of the party-state. Some stressed the powers of the Chinese party-state to suppress opposition. Others cited how the country’s overall economic success had bolstered support for the regime through “performance legitimacy.” And still others cited the rise of nationalism.

One of the most thoughtful analyses that pushed back on the original expectations of political fragility was offered by a group of scholars centered around sociologist Martin King Whyte of Harvard University. This group, which included experts from around the United States and China, did pathbreaking empirical work on how Chinese society evaluated inequality. Although the original surveys spanned from 2004 to 2014, much of their work was explained by Professor Whyte in his 2010 book, Myth of the Social Volcano: Perceptions of Inequality and Distributive Justice in Contemporary China (Stanford University Press, 2010).

Multiple nationwide surveys that Whyte helped coordinate showed that the Chinese populace broadly saw inequality as a legitimate outcome of a market economy; they primarily attributed success to people’s hard work and, conversely, failure to people’s own weak capabilities. Instead of crediting or blaming the economic system, responsibility – for better or worse – was placed on the shoulders of individuals. Moreover, most respondents had a positive view of the future and were hopeful they might see meaningful improvements in their economic conditions.

Fast forward a decade later, and it is essential to ask whether their original conclusions still hold. Over the last ten years, China’s economy and politics have significantly changed. China has become much wealthier overall and is a leader in various high-tech industries, but annual growth has slowed dramatically. As wages have risen, factories have automated some of their production. The adoption of artificial intelligence (AI) is in the early stages of creating another transition in the employment landscape. The Covid-19 pandemic and China’s zero-Covid strategy, particularly in 2022, further slowed growth and affected people’s sense of stability. China’s domestic political environment has also changed, with a re-centralization of authority within the CCP, a higher emphasis on ideological compliance, and renewed support for the state-owned sector at the expense of private industry.

At the same time, although absolute poverty has been dramatically reduced, as Big Data China documented in an in-depth feature from May 2022, inequality is still persistently high. Indeed, concerns over inequality have surged globally, and China is no exception, as the government’s “Common Prosperity” drive demonstrates. Official data show a plateauing of inequality at a relatively high level, but unofficial metrics show gaps continuing to expand. (see Figure 2)

Given these changes in the broader economic and political environment, it is essential to re-visit the questions that Professor Whyte and his colleagues asked in the 2000s and 2010s. Luckily, he and other scholars, including Big Data China’s co-founder Scott Rozelle of Stanford University, have been hard at work investigating these issues once again.

This feature introduces the findings from their latest surveys. They and their colleagues found that perspectives have, indeed, shifted significantly in a more pessimistic direction. The next section summarizes their data and key conclusions. The discussion then turns to an assessment of the potential implications for China’s economy and politics and speculates about these changes for China’s relationship with the rest of the world.

Changing Views on Inequality

The surveys conducted and analyzed by Professor Whyte and his collaborators in China and elsewhere over the last two decades are an excellent metric of changing trends in China because they have been carried out repeatedly over the past two decades. Central to much of this work has been collaboration with Peking University’s Research Center for Contemporary China (RCCC), founded by Professor Shen Mingming, who received his doctorate in political science from the University of Michigan, which not coincidentally was also Professor Whyte’s academic home in the earlier part of his career. (Details on the survey methodology are at the end of this feature.)

The surveys carried out between 2004 and 2014 indicate that most respondents had positive views on the system’s ability to deliver more opportunities in the future and that effort and hard work were rewarded. These findings were notable because, as mentioned above, inequality increased rapidly after 1978 and has remained stubbornly high since the 2000s in China. Perceptions as to the drivers of inequality are central to the populace’s sense of fairness and belief in the efficacy of China’s economic and political systems.

The latest round of surveys, which were conducted over the course of 2023 through an online app, are so recent that Whyte and his team have yet to publish any related academic articles. And so the data from the latest survey is being shared publicly in this Big Data China feature for the first time. When placed alongside the data from the previous series, it is clear that there have been significant changes in how people view inequality and opportunities in the Chinese economy, assigning less and less responsibility to themselves and more to the economic system.

As Figure 3 shows, between 2004 and 2014 respondents identified lack of ability, lack of effort, and low education as the main factors that explained poverty in China. Structural issues, such as unequal opportunities, ranked 5^th, while an unfair economic structure ranked 9^th. The originally low assignment of responsibility to systems changed dramatically in the 2023 survey. Instead, respondents in China now believe that structural factors are most important in explaining why people are poor. Unequal opportunity surged to being the number one reason why respondents believe people are poor, and an unfair economic structure jumped to number three. Education remained the second most important factor, but uneven access to education in China is in itself a source and a symptom of widespread and persistent inequality.

The survey also asked respondents what explained why people in China are rich. The answers closely mirrored those to the question on poverty, as illustrated in Figure 4. In the surveys conducted between 2004 and 2014 the top factors selected were related to human capital, that is, ability and talent, hard work, and good education. In the 2023 survey those individual-level factors fell to 4^th, 5^th, and 7^th place, respectively; meanwhile, structural factors, including having good connections, growing up with more opportunities, and an unfair economic structure, became more prominent in the responses.

The data point to a shift in perceptions even when focusing on the share of respondents that identified certain factors as important or very important in determining why people become rich (see Figure 5) or why they are poor (see Figure 6). For example, in 2014 well over 60 percent of respondents believed that both lack of ability and lack of effort were important or very important explanations for why people were poor in the country. By contrast, in 2023 only 31 percent felt that lack of ability mattered, and only 33 percent attributed being poor to lack of effort.

The recent survey also investigated people’s perceptions of inequality by asking them to evaluate a series of statements about opportunities and the fairness of the system (see Figure 7). The picture that emerges is consistent with the one painted by the other data. For example, the number of respondents who disagreed with the statement, “Whether a person becomes rich or remains poor is their own responsibility,” increased from 25 percent in 2004 to 48 percent in 2023. Meanwhile, those who agreed with the statement, “In our country, effort is always rewarded,” dropped from 62 percent to 28 percent. These trends suggest less confidence in meritocracy and the economy to deliver for all citizens equitably.

The perceptions on inequality and declining fairness of the system that emerged from the survey track respondents’ sentiments concerning the economy and their own families’ welfare. Indeed, the survey finds an increase in the share of respondents who think that their families’ economic situation has declined across all income brackets in 2023 compared to previous years (see Figure 8).

The findings in Figure 8 are particularly noteworthy because, unlike in the case of inequality, which has remained high but steady over the past two decades, the data also indicate a more challenging economic situation for the country as a whole. It may be that a slowing economy means fewer opportunities and raises more concerns about inequality and fairness than before. In other words, inequality may be more acceptable when the pie is growing very quickly, but it becomes less so when the economy falters.

China’s Social Volcano Is Bubbling, but Is Unlikely to Erupt

To say that inequality in and of itself doesn’t matter at all, as we did out at the outset of this feature, is hyperbole. Clearly, material inequality affects people’s access to education and certain kinds of jobs and also limits people’s ability to consume and raise a family. And limits on work and consumption can create a vicious cycle that is difficult to escape. That said, the core insight from the work of Whyte, Rozelle and their colleagues is that it is the moral judgments about the causes of inequality that are more important, and those views are not etched in stone simply by material conditions but rather by a complex mix of social and political circumstances that affect people’s evaluation of the present and shape their expectations about the future. Their surveys show that people in China today have less confidence than in earlier decades that the country’s economic system and institutions provide fair opportunities for members of society.

The original question animating many observers’ attention concerned the relationship between inequality and political stability. It appears that those who thought there was a social volcano ready to erupt and remove the CCP from power did not appreciate that the Chinese populace for a long time found acceptable the country’s inequality and the trajectory of their own lives. The latest survey, though, shows a growing disquietude, with more widespread feelings of inequity and unfairness. As Figure 9 shows, in previous decades views about the causes of wealth varied significantly between China and other post-Socialist countries, all of whom experienced systemic political changes in the 1990s. By 2023, the gap between China and these other countries had narrowed considerably.

The same narrowing in views between China and other post-socialist countries also narrows when the question turns to perceptions of poverty (see Figure 10).

When the comparison goes beyond post-socialist countries, the reasons for concern do not disappear. In authoritarian regimes that underwent political change during the Arab Spring, populations in several countries evinced similar views about inequality. One example is Morocco, shown in Figure 11, where negative views about inequality rose between 2000 and 2008, by which time many believed a key goal should be to make incomes more equal.

Although suggestive, Whyte and his colleagues do not believe major political instability is on the horizon in China, and for good reason. There may be signs of a bubbling social volcano, but it is far from inevitable that it will erupt. China’s economy is growing more slowly and faces a range of structural problems, but some factors of the recent slowdown are cyclical in nature, and there is a wide range of economic trajectories the country could take in the future. The right kind of policies that effectively harness the potential for growth and address concerns about inequality could generate a reduction in perceptions of inequity and unfairness and greater popular optimism about the future. The Chinese government’s intensive attention to “Common Prosperity” at least reflects an awareness that their standing in the public’s eye is heavily shaped by perceptions of whether the economy benefits everyone. As China nears the Third Plenum of the 20^th Party Congress, there are indications that there could be significant reforms related to factors shaping growth and inequality, including taxation, local government finances, the housing market, education, the residency system, and the social safety net.

In addition to upside economic scenarios that could lead to improvements in popular views, even if the economy does not dramatically bounce back and levels of dissatisfaction are more persistent, directly protesting and challenging the system seem unlikely because of the high risks of such behavior. Instead, more likely are continued signs of passive resistance that are already visible, including “lying down” (not working hard) and “laying low” (continuing one’s activities but trying to avoid attention). Another is leaving, with a small proportion of elites trying to move themselves, their families, or their assets abroad.

While some are focused on the potential links between inequality and political stability, the discussion suggests that more attention should be placed on the immediate, more tangible effects of changing perceptions. In addition to lying down, laying low, or leaving, a public that is more uncertain of its future is less likely to engage in consumption or invest in new business. And so the most likely consequence of a sense of inequity is a slowing economy. It also means that the kinds of statements and actions the government must take to assuage such concerns are higher than in periods of greater optimism. And it is possible that the bar officialdom will have to clear to induce greater public confidence will grow higher.

Policy Implications

China’s domestic politics continue to matter a great deal to the United States and the rest of the world. Public sentiment in China has important implications for social stability as well as confidence in the economy, which many in China see as a key factor shaping its potential for economic growth. Indeed, a more socially unstable China is an unknown factor that has not been part of the calculus when analyzing the country since 1989.

As noted above, the changes in opinion documented in these surveys are highly unlikely to result in widespread unrest. Nor, as Taylor Fravel of MIT has pointed out, are they going to have a decisive effect on Chinese military decisions. However, growing discontent with the economy and with inequality could affect the decision-making process in Beijing when it comes to the economy, which has implications for China’s relations with others. For example, policies such as “Common Prosperity” may be expanded further, with implications for businesses in China. Moreover, the government may double down on the current trajectory of supporting manufacturing, which it seems to believe is best path forward for to generate further growth and development.

Inequality and low confidence in the economy are not uniquely Chinese problems. Indeed, the U.S. government has been facing similar kinds of anxieties about the unfairness of the economic system and sense of inequity by various segments of the U.S. population. As a result, the Biden administration and future administrations, as well as Congress, are facing pressure to develop policies that address these perceptions of inequity and raise people’s perceptions that the system is fair. Although not necessarily a straightforward area for cooperation, the topic could be explored jointly through bilateral dialogues as well as in a multilateral setting through, for example, a working group at the G20 focusing on best practices on taxation, welfare provision, and education policy.  

Finally, forecasting should consider what might happen if discontent and low confidence in the system worsens in China. For example, in addition to a small trickle of elites, there are signs of a surge in out-migration from China in 2023 when the number of Chinese migrants stopped at the U.S. southern border was ten times higher than the previous year. Data from the first half of 2024 indicate that the number of migrants from China trying to enter the United States illegally may be growing even more. The trend may not last, as the country’s situation stabilizes after the lifting of harsh zero-Covid policies in 2022 and the economic shock caused by the collapse of the real estate sector, but it is worth monitoring. Indeed, there may be some potential advantages for the United States: some of those most interested in leaving China may be educated middle-class citizens who are skeptical of their government. In other words: there may be a rise in skilled workers willing to join the labor force in the United States and other advanced economies.

In conclusion, this study by Professors Whyte, Rozelle and their colleagues show a remarkable change in sentiment in China for the first time in 20 years, reflecting a substantial shift in the economy and in people’s perceptions and expectations. There is no reason to think that these perceptions are unchangeable, and indeed, they have been shaped by the excessively strict policies implemented to control the spread of the Covid-19 virus over the course of 2022. However, the findings from these surveys point to an overall challenge for the Chinese government in the coming years, as it works to rebuild confidence in the economy’s ability to provide opportunities for all and develop a revised social contract acceptable to the populace. Although more research needs to be conducted to identify all the drivers at play and the various potential implications, the trends need to be monitored closely and could shape policy by central and local authorities in the coming months and years.

The authors wish to thank Ryan Featherston for his research assistance on this feature.

Photo by WANG ZHAO/AFP via Getty Images

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