Poor Chinese in Particular Benefit from Party Membership
Research
22.02.2024
Chinese Housing Reform of the 1990s Creates Wealth Mostly among Households with CCP Members
Households in urban China with members of the Chinese Communist Party (CCP) are more than 20 per cent wealthier than those without CCP members. Surprisingly, amidst the transition phase of the world’s largest emerging economy, political status seems to be mitigating wealth inequality rather than excecerberating it. This trend is primarily due to China’s extensive housing reform in the 1990s, according to a recent ZEW study.
The study demonstrates a shift in the wealth premiums of CCP households in urban China: before the reform, wealth was concentrated in the middle of the distribution, while afterwards it tended to be concentrated among the poorer. As a result, a marginal rise in the share of CCP households significantly bolsters net wealth among the poorer more than among the richer, thereby reducing wealth inequality. “This shift is largely attributed to the fact that poorer CCP households are more likely to own real estate assets than non-CCP households. The effect weakens the wealthier households are,” explains Li Yang, PhD, co-author of the study and researcher in the ZEW Research Group “Inequality and Public Policy”.
Employees in public sector and state-owned enterprises benefit disproportionally
One aspect driving this shift is the influence of urban housing funds – a major instrument for Chinese housing privatisation since the 1990s. The funds cover various housing-related costs, including down payments, construction, property purchase, or renovation. Economically disadvantaged households benefit significantly from these funds, often channeled through their work units, such as state-owned enterprises or party memberships. While around 13 per cent of China’s urban population paid into a housing fund in 2020, a noteworthy observation is the overrepresentation of employees working in the public sector and state-owned enterprises, constituting half of the contributors. They therefore benefit disproportionally from this social measure.
Data from over 40,000 households
The study, based on wealth data from over 40,000 Chinese households, examines the effects of Communist Party membership on wealth distribution and accumulation in China. The main data sources are the Chinese Household Income Project (CHIP) and the China Household Finance Survey (CHFS), which have been carefully harmonised.
