Skip to main content

Report: 'Hidden income' makes China's rich wealthier than thought

By Kevin Voigt, CNN
September 24, 2013 -- Updated 0701 GMT (1501 HKT)
A 2011 file photo of a cleaner sweeping the floor next to a Ferrari in a
Beijing luxury car showroom.
A 2011 file photo of a cleaner sweeping the floor next to a Ferrari in a Beijing luxury car showroom.
STORY HIGHLIGHTS
  • Survey: China's urban rich are making far more than they officially report
  • Researchers found unreported "gray income" was 6.2 trillion yuan (U.S. $1 trillion)
  • Suggests the top 10% of households earn nearly 21 times more than the poorest
  • "The richer the household, the more likely it receives shadow income"

Hong Kong (CNN) -- China's urban rich are making far more than they officially report, suggesting the wealth gap in the world's second largest economy is much higher than previously thought, according to a new study.

The China Society of Economic Reform released a survey Monday that found "gray income" was 6.2 trillion yuan (U.S. $1 trillion), or 12% of GDP. "Gray income" can range from illegal cash from kickbacks to unreported income and gifts.

"The result has highlighted expanding social inequalities and policy issues surrounding official corruption and income distribution," said Wang Xiaolu, who led the research for the CSER, in an article in Caixin Online. "The richer the household, the more likely it receives shadow income."

The study comes a day after Bo Xilai, a once high-flying politician, was sentenced to life in prison for bribe-taking,15 years for embezzlement and seven years for abuse of power. Bo is appealing the verdict.

The CSER surveyed 5,344 urban families in 18 Chinese provinces. The results suggest the top 10% of households earn nearly 21 times more than the poorest 10%. The National Bureau of Statistics places income disparity far lower, saying China's wealthiest make 8.6 times more than its poorest. "China is in a dangerous zone as one the most unequal countries in the world," Wang wrote.

The survey found that rich families gain 80% of their wealth from business and on average "have decent gains" in stock markets, whereas most middle and lower income families lose cash in the capital markets, Wang said. "We can't rule out that some of these business gains are problematic, or even illegal, because many survey takers count kickbacks as business gains," he wrote.

Much of the high gray income is linked to the loose credit handed out between 2009 and 2010, Wang wrote, as well as the rapid increase of government investment during the same period.

"To stop widening income disparity and unfair allocation, in addition to anti-corruption campaigns, there needs to be gradual but firm progress in economic, political and social reform that moves the country closer to the rule of law with public scrutiny over administrative power," he said.

ADVERTISEMENT
Part of complete coverage on
October 29, 2014 -- Updated 0518 GMT (1318 HKT)
A top retired general has confessed to taking bribes, becoming the highest-profile figure in China's military to be caught up in President Xi Jinping's war on corruption.
October 27, 2014 -- Updated 0507 GMT (1307 HKT)
A group in China escapes from a stuck elevator thanks to one man and his trusty hammer. CNN's Kristie Lu Stout reports.
October 23, 2014 -- Updated 1352 GMT (2152 HKT)
Facebook's founder says he taught himself Mandarin and tested his skills with students in China.
October 24, 2014 -- Updated 0133 GMT (0933 HKT)
China launched an experimental spacecraft that is scheduled to orbit the moon before returning to Earth.
October 28, 2014 -- Updated 1619 GMT (0019 HKT)
Full marks for ingenuity: This was a truly high-tech scam.
October 21, 2014 -- Updated 0526 GMT (1326 HKT)
The rationale behind Confucius Institutes -- an international chain of academic centers run by an arm of the Chinese government -- is understandable.
October 24, 2014 -- Updated 1511 GMT (2311 HKT)
Smooth jazz saxophonist Kenny G wants everyone to know that he's not a foreign agitator trying to defy the Chinese Communist Party.
October 17, 2014 -- Updated 1113 GMT (1913 HKT)
A smuggler in Dandong, a Chinese border town near North Korea, tells CNN about the underground trade with North Korean soldiers
October 28, 2014 -- Updated 0511 GMT (1311 HKT)
Yenn Wong got quite a surprise one morning earlier this month when she found out an exact copy of her Hong Kong restaurant had opened in China.
October 15, 2014 -- Updated 0315 GMT (1115 HKT)
When I first came across a "virtual lover" service on e-commerce site Taobao, China's version of Amazon, I thought it was hype.
October 14, 2014 -- Updated 1315 GMT (2115 HKT)
Each year Yi Jiefeng does what she can to stop China turning into a desert.
October 13, 2014 -- Updated 1454 GMT (2254 HKT)
As its relationship with the West worsen, Russia is pivoting east in an attempt to secure business with China.
October 8, 2014 -- Updated 0229 GMT (1029 HKT)
Aspiring Chinese comics performing in Shanghai's underground comedy scene hope to bring stand-up to the masses.
September 30, 2014 -- Updated 1654 GMT (0054 HKT)
Liu Wen is one of the world's highest-paid models and the first Chinese face to crack the top five in Forbes' annual list of top earners.
October 3, 2014 -- Updated 1144 GMT (1944 HKT)
Cunning wolf? Working class hero? Or bland Beijing loyalist? C.Y. Leung was a relative unknown when he came to power in 2012.
October 2, 2014 -- Updated 1125 GMT (1925 HKT)
 A man uses his smartphone on July 16, 2014 in Tokyo, Japan. Only 53.5% of Japanese owned smartphones in March, according to a white paper released by the Ministry of Communications on July 15, 2014. The survey of a thousand participants each from Japan, the U.S., Britain, France, South Korea and Singapore, demonstrated that Japan had the fewest rate of the six; Singapore had the highest at 93.1%, followed by South Korea at 88.7%, UK at 80%, and France at 71.6%, and U.S. at 69.6% in the U.S. On the other hand, Japan had the highest percentage of regular mobile phone owners with 28.7%. (Photo by Atsushi Tomura/Getty Images)
App hopes to help those seeking a way out of China's overstrained public health system.
October 3, 2014 -- Updated 0020 GMT (0820 HKT)
Yards from pro-democracy protests, stands the Hong Kong garrison of the People's Liberation Army (PLA), China's armed forces.
ADVERTISEMENT