COVID-19 Removes the Cloak on Economic Inequality in China

By Junyue Liao / Winter 2021

Sometimes in life, tragic life events happen by chance, which sets a ball rolling on a series of either misfortunes or luck. The COVID-19 was one such life happening depending on the side of the spectrum that one stood on. The deadly virus was first reported in Wuhan in December 2019 and by 2020, it had spread to other continents, with countries closing down their borders, in a bid to prevent the spread of the disease to their nationals. At the time that the disease got to the United States, my Chinese friend Haiqi was an undergraduate student at a college in California. Before the virus, Haiqi was a typical college student, enjoying her life, meeting new people, and traveling around the country, as her parents could afford to support her. However, her life changed overnight. Haiqi contracted the virus while in the United States, and with it came the psychological trauma, stigmatization, and the sudden high cost of treatment that her family had not planned for.  To worsen the situation, since countries had shut down the borders, Haiqi could not travel home and had to be all alone in the school and the state, for a prolonged period. Many middle-class people, while they could afford treatment, still felt the effect of COVID in their finances.

If the middle-class were duly affected, how did the poor fare? The grandfather of another close friend, Bao, was infected in China, where they lived. Being an old person, his condition was delicate and he required fastidious medical treatment. The whole family threw itself behind this task, to save the grandfather. Almost all of the family's savings were emptied at the hospital counter, with everything else, including Bao's education being put on hold. Bao could no longer afford her tuition fee and had to take up three part-time jobs and get deep into loans to finance her education. This not only affected her education and social life but mentally got her into a dark place. Just like Bao, most people who had inadequate savings got into deeper debts.

These harrowing stories were not the only stories lived in these trying times. The truth of life is that it is always multifaceted; the stories of despair do not cut across the entire population. This was the case in China as well. An article that was written about this phenomenon in China reported that the extremely rich people in China “got $1.5 trillion richer during the pandemic” (France 24). The virus presented the opportunity for rich businessmen to become wealthier by producing and selling protective clothing and masks. The WHO and the Chinese government made it a requirement that these protective clothing should be used by everyone and China has a huge population of 1.4 million people (Worldometer). Therefore, the demand for the products was great. Some of the rich businessmen also became richer through investing in e-commerce and in the gaming industry. Jack Ma was reported to have an increase of $58.8 billion to his net worth during the period of the pandemic, due to his business, Alibaba, which focuses on online shopping (France 24). This situation was made possible by the fact that people were locked in their houses due to lockdown measures that were aimed at controlling the virus. Following closely was Pony Ma, who raised his net worth by $57.4 billion, owing to his investments in the gaming industry. Tencent, the owner of WeChat, also recorded a 50% increase in wealth following the pandemic due to an increase in online communication and payment (France 24). Some rich people, who had been millionaires, got into the billionaires list such as Zhong Shanshan of Nongfu bottled water, Wang Xing of Meituan a food delivery application and Richard Liu, who had invested in e-commerce (France 24). Apart from these industries, it was noted that rich entrepreneurs in the health sector also increased their net worth notably. Jiang Rensheng, who owns a company known as Zhifei, which makes vaccines increased his value to $19.9 billion. The super rich thus became wealthier.

With each waking day that the virus was present in China, the economic disparity in the nation increased. The middle-class such as Haiqi's family, who could afford to pay for their daughter's study in the United States, had to incur huge health costs, which they managed, but it made a dent in their pockets. Those with low financial capability, such as Bao's family, suffered a heavy blow, which affected other areas of their lives such as their daughter's education. It left the family and other poor people, reeling in loans and unable to afford daily necessities (Baniamin et. al. 10). However, the wealthy who invested in factories to produce the protective gear reaped much in terms of profits. Entrepreneurs in the e-commerce, health, gaming and online payment industries also earned great profits. The wealthy people's finances grew immensely with a number of millionaires joining the billionaire club. This situation is reflected in the Chinese newspaper headlines, "China Aims to End Extreme Poverty, but Covid-19 Exposes Gaps" (Hernandez). The effects of the virus increased the wealth gap between the rich and the poor in China significantly.

Apart from the financial burdens that came with medical treatment, COVID-19 affected the poor and the middle-class in various other ways. Some of the strategies placed by the World Health Organization to mitigate the illness placed new expenses to the population. One of them was the adherence to the use of facial masks and other protective gear. Most of the effective facial masks were not reusable. Therefore, a family had to buy a mask daily which was expensive for the poor. To make the situation worse, the increased demand for such products led to unscrupulous tradesmen hoarding the masks so that the price can rise, burdening the families that are struggling to survive. The restrictions of movement also curtailed the ability of the poor to make a living. Bao, for instance, could only search for jobs within her area, which limited her options.  Even though these strategies were placed in good faith, they worsened the economic situation of the poor people.

The coronavirus disease only removed the cloak that lay over the economic inequality in China. China’s national income disparity is currently one of the greatest globally (Hernandez). My hometown is in a rural, small and undeveloped area of China. Most people in the area have not been exposed to technology, quality education, or any other economic activity apart from farming. Before the virus, I had observed the stark difference in the way of living of people in my hometown and those in other developed areas of China. Generally, the economic disparity had always been easily visible in China between people living in rural and town areas (Zhou and Song 5). The reason is that agriculture gives fewer returns as compared to industries in China. Moreover, in the rural setting, people are exposed to fewer educational and technical advancement opportunities and are also paid less for work done just as in my hometown. Therefore, while the world becomes connected and the barriers of communication, movement, and trade are removed in urban areas, rural areas become marginalized. The effect of COVID-19 in my rural hometown was replicated in all the rural areas in China. In my hometown, some people from Wuhan traveled by, carrying the disease into the small village. The disease spread among the inhabitants and my small hometown was locked down, without access to the outside world. As a result, families who had not saved much (which was most families) suffered from having inadequate food, psychological stress, and fear of the COVID-19’s high death rate.COVID-19 thus exacerbated the economic disparity in China which had been caused by the disparity of opportunities and payment for people in rural and urban areas.

Since the economic disparity in China has been growing annually, the government had become alarmed and for some years, had tried to deal with the inequality through strategic plans for the development of rural areas such as my hometown. In my hometown, the government has set up vocational training opportunities to make young people more employable. However, this has only solved one part of the problem. The other aspect of the problem is that when these young people become employable, they need to get jobs that pay well, so that the income disparity may be reduced. Yet, businesses tend to maximize profits by paying lower wages to the workers so that the firm can make more profits. This ruthlessness is easily noticeable in the capitalistic world we live in. It has been experienced globally as documented by Zinn when he wrote, “there were enough well-off people to push the others in the background” (Zinn). This is also what Monbiot describes as neoliberalism, citing that it is considering competition as the guiding feature for human beings. It involves watching the world through the lens of winners and losers, and it results in inequality being considered as the right thing, “a reward for utility and a generator of wealth” (Monbiot). This situation is worrying and has prevented the closing of the economic gap. In the COVID-19 period, millions of Chinese workers had their salaries slashed so that companies could maintain operations profitably, to ensure that shareholders would continue to invest in the company. Therefore, shareholders still earned an income in the difficult period, at the expense of the workers. The minimum wage limit was thrown out of the window in the challenging time, making it difficult for the economic gap to be closed.  Capitalism, to some extent, provides challenges to the Chinese government as it seeks to reduce the economic disparity in the nation.

Another challenge that the government faced in reducing the wealth gap is that by having money, the rich are in a better position to obtain more, thus increasing the gap further. As stated by Oxfam, "If you are already rich, you have to try hard not to keep getting a lot richer"(Oxfam 5). In other words, being rich breeds certain benefits that lead to ease of obtaining more wealth, such as access to the best education, inheritance, and people in the same economic class (Monbiot). What this means is that those with inherited money can easily obtain the best investment advice and grow their money more. While the COVID-19 hit many small families in my small hometown, and Bao’s family, getting them deep into loans, it had a different effect on the extremely rich. The wealthy people saw this as an opportunity to invest in the mask and PPEs production industry, which required huge amounts of funds to buy the equipment and to install them. This industry grew at a rapid rate with higher demand for these materials as compared to the supply. Therefore, the super-rich still made more money during the pandemic, as the people in the lower parts of the economy kept sinking.

Considering the alarming growth of the income disparity in China, and especially with the worsened effects due to COVID-19, the question that arises is, how does Bao’s family, and others in my hometown, rise from these circumstances? First, the government should ensure that rural areas such as my hometown have access to quality education and employment opportunities. Growing up in my hometown, the public schools did not have adequate teachers and the school amenities were underdeveloped. This forced my parents and Bao’s parents to take us to private schools which were quite expensive. Some parents cannot afford the private education fee, thus some choose to forgo education fully. This is a ticking time bomb, as shown by the effects of COVID-19. When people in Chicano in America demanded that their issues be heard by the government, they received better education (Mariscal 210-244). This is the route that we must take. It is a known fact that education opens opportunities for future economic growth.

Another way that the Chinese government can reduce the inequality gap is by encouraging entrepreneurship through stability in prices, political stability, and favorable interventions. The government, through ventures with non-governmental organizations, should also support small and medium enterprises through the provision of short-term and long-term loans for business expansion, and provision of technical management skills. These would be useful to many businesses that could not survive the pandemic. Entrepreneurs employ other people; therefore, entrepreneurship would be a quick way of reducing the economic disparity.

Finally, the government may develop the rural and underdeveloped areas by ensuring that the rich pay their employees fairly and pay taxes diligently. If Bao was paid adequately at her three part-time jobs, she would not need to take three jobs at the same time to cater for her tuition. She would have more peace of mind and would be able to study better. The collected taxes may be utilized to further the development of rural and underdeveloped areas.

Moreover, the Chinese government could invest in the provision of training and facilities to improve access to technology. As seen in the COVID-19 pandemic, some firms were able to do their work digitally. People could work from home as they had access to a proper internet connection, and meetings were carried out virtually, such that all deliverables of the business were met on time. Other people found innovative ways of offering their services and monetizing them via the internet, such as online schooling, online body workouts, and even consultation services. This, however, required digital skills and capital. The government must ensure that all students have digital to keep them at par with the world. Training digitalization skills enable individuals to be better prepared in the current century and creates opportunities for earning an income which would reduce the income disparity.

The growth of the wealth inequality gap in China is concerning and should be addressed with urgency. Such inequality tears society apart and counters the fight against poverty. The greater the wealth disparity, the more people in the nation are sinking further into poverty and debt just as Bao’s family did. This reduces the quality of life of these people, the services they can provide to their families, and generally, the rate of economic growth of the state. With an increase in poverty comes an increase in other vices such as criminal activities in a bid to survive. If a person cannot provide for his or her family, they will be tempted to steal instead of watching the family go hungry. This would increase the insecurity and fear levels of China- a country that is instead striving to become a superpower. To mitigate these concerns, it is important that the state considers the effect of COVID-19on the already wide income disparity in China, and that the necessary steps are undertaken to ensure that this gap is bridged.

COVID-19 has shown me the stark truth of the economic disparity in the nation. The poor sunk into greater debt while the rich flourished. This situation is undesirable as it will increase crime and negatively impact the economy. It will also hold back China from attaining the international status it seeks to attain. To mitigate this problem, the government must improve access to quality education and employment opportunities among the poor, ensure that the environment is conducive for entrepreneurship and guarantee that the rich contribute fairly to society. It is only when those at the bottom rise, that the whole of China will rise.

Works Cited

Baniamin, Hasan Muhammad et al. "The COVID-19 Pandemic: Why Are Some Countries More Successful than Others?" SSRN Electronic Journal, 2020: pp.1-23. DOI: 10.2139/ssrn.3575251

France 24. "China's super rich got $1.5 trillion richer during pandemic: report" France 24, 20 October 2020. Accessed 15 March 2021

Hernandez, Javier C. "China Aims to End Extreme Poverty, but Covid-19 Exposes Gaps." The New York Times, 26 October 2020. Accessed 9 March 2021.

Mariscal, Jorge. "To Demand that the University Work for Our People." Brown-Eyed Children of the Sun: Lessons from the Chicano Movement, 1965-1975. University of New Mexico Press, 2005, pp.210-229.

Monbiot, George. "Neoliberalism-The Ideology at the Root of All Our Problems." The Guardian,15 April 2016, Accessed 9 March 2021.

Oxfam. An Economy for the 99%. Oxfam, 2017.

Zinn, Howard. "Self Help in Hard Times." A People's History of the United States, Harper & Row, 2009. Accessed 9 March 2021.