Business

Asia's economic forum addresses income inequality

Spain's Prime Minister Jose Luis Rodriguez Zapatero and Chinese counterpart Wen Jiabao ahead of Boao Forum for Asia
Image caption China hosts the Boao forum every year, bringing together politicians and business leaders

The view along the road to Boao, a sleepy fishing village in the South China Sea, is a visual reminder of how unequal China has become.

Instead of palm trees and rice paddies, visitors are now greeted by mile after mile of luxury condominiums.

Reflecting on the five-star accommodation, Feng Jingwu, a lifelong resident, says few locals could afford the newly-built homes.

"They belong to mainlanders with money. We locals don't live in those flats," he says.

Inclusive development

The gap between the rich and poor is what politicians and business leaders will tackle at this year's Boao Forum for Asia, the 10th anniversary of Asia's version of the World Economic Forum.

Image caption Long Yongtu says this year's forum will look at ways to help more people benefit from economic growth

This year, "inclusive development" was chosen as the forum's theme.

"In the past, the forum focused on creating an atmosphere of co-operation between countries," says Long Yongtu, a member of Boao's Council of Advisers.

"But this time, we are going a step further. We are looking at ways of ensuring more people within countries enjoy the benefits of economic growth."

China hosts the event every year. In the 10 years since the Boao Forum began, economic activity in China has quadrupled in US dollar terms.

But the difference in the lives of the country's "haves" and "have nots" has grown even faster, causing anger and resentment.

Inflation and corruption

According to Chinese economists, the country's Gini coefficient, a measure of income inequality, has risen to a level just below 0.5.

That is a much higher figure than Europe or Japan. At the same time, the country's per capita income is just one-tenth that of the US or Japan.

When China officially overtook Japan as the world's second-biggest economy earlier this year, most Chinese seemed puzzled by the international attention.

Image caption Zhang Xin says measures to reduce the wealth gap may hurt property developers in the short term

Most chose to bemoan the downsides of growth: inflation, corruption and the rising wealth gap. On every point, Japan, a sometimes reviled neighbour, was judged superior.

A stroll through any city explains why.

From bus stops to teahouses, the national conversation has been hijacked by the soaring cost of living.

The common perception is that blistering economic growth is driving prices to unaffordable levels. People are struggling to keep up.

Housing moves

The problem is especially acute in the property sector. Would-be grooms agonise over whether they can afford to live up to tradition by buying homes for their brides.

In response, Beijing has sought to bring down the price of housing by raising borrowing costs and by putting restrictions on multiple purchases.

Nationally, the moves have hurt developers and buyers accustomed to a red-hot market.

The tension between government policy designed to help the masses and the interests of powerful business people is expected to be explored at the forum.

Zhang Xin, chief executive of Soho China, Beijing's largest property developer, says she supported the austerity measures, but acknowledged the uncertainty they have caused.

"Generally, I would say nothing is better than this to tackle the income gap between the rich and poor, even if it hurts property developers temporarily," she says.

As for the area around Boao, the new property restrictions seem to have had no effect.

Next year, visitors to the Boao Forum for Asia may well see more modern high rises dotting the skyline.

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