The Controversial Chinese Economist Uncovering Tough Truths

“What he found fundamentally changes the way we think.”

Economist Gan Li and his researchers at Chengdu’s Southwestern University of Finance and Economics are gearing up for their national survey of Chinese households, which begins in early July. The aim of the biennial census is to measure the wealth of China’s 1.4 billion people—how much they earn, how many apartments they own, and how much land they have and how they use it. Bankers, economic analysts, property developers, and policymakers are eager to see what the survey will reveal.

The now much anticipated project almost suffered a premature death in 2012 after it exposed how Chinese society had become one of the most unequal in the world. Gan’s survey showed that China’s Gini coefficient, a measure of income inequality, had reached 0.61, well above the 0.4 level widely considered destabilizing by economists. The top 1 percent held more than one-quarter of China’s wealth, while 430 million Chinese struggled day-to-day.

Gan

Photo illustration: 731; Photographer: Qilai Shen/Bloomberg

Less than 24 hours after Gan released the news, six cadres from the National Bureau of Statistics descended on his Survey and Research Center for China Household Finance. They demanded the data. The economist wondered whether he’d be shut down. His fears proved unfounded: “They found no errors,” he says. “A few days later, someone told me we should be OK.”

Economic indicators have long had a special role in China. During the Mao era, the statistics bureau was an arm of the state planning commission, and it focused on counting widgets made by state-owned factories. Other parts of the economy were largely ignored. “Statistics were never about serving the public. They were—and still are—for the purposes of serving the government bureaucracy,” says Carsten Holz, an expert on Chinese statistics at the Hong Kong University of Science and Technology. He says the director of the statistics bureau also serves as its party chief, adding to the political pressures.

Gan, 50, has been on a mission to depoliticize statistics. Along with the flagship household survey to which the People’s Bank of China research department provides logistical support, the center carries out smaller projects. “The problem is not just the gray areas,” he says. “In China, lots of things are completely dark.”

The center, which usually has a staff of 65, swells in size for its nationwide census. Some 2,500 Southwestern University students undergo two weeks of training to learn the basics of interviewing. Then they talk to some 40,000 families, often going to their home province, where they understand the local dialect, and spending nights doubled up in cheap hotel rooms. The students ask about annual wages and how much jewelry or livestock a family has. “After finishing a household, we had to walk a long way through rice fields to get to the next household,” says Fan Lingyun, who worked on the 2015 survey. “Sometimes we would run into village dogs and have to turn around and find another way to go.”

Students carry a Huawei tablet loaded with the survey questionnaire. The tablet is connected by GPS to Gan and his team in Chengdu. Other indispensable items include a calculator to help families figure out their finances, bottled water, and a flashlight to navigate dark apartment building lobbies and village alleyways. The students are also trained in basic first aid in case a surveyor falls ill.

Born and raised in Chengdu, Gan entered Beijing’s elite Tsinghua University’s department of economics and management when he was 15. He credits his interest in economics and public policy—and that of many of his classmates’—to a then-popular novel, Manager Chao Assumes Office. “It turned out we all had read the same book,” he says. “It is the story of how someone becomes manager of a losing factory, but after installing new policies and new incentives, the factory becomes revived.” Gan eventually received a doctorate in economics from the University of California at Berkeley, and he now serves as professor at Southwestern University in China and at Texas A&M University in College Station.

After his run-in with the authorities in 2012, Gan hasn’t released an updated Gini coefficient, but he still sees income inequality as the biggest obstacle to China’s development. Even as the country has built up new social welfare programs, including a monthly subsidy for the poorest, household consumption has not grown much, because most Chinese still have no extra money to spend: The nation’s high savings rate is produced by the wealthy few. Gan wants more redistribution of income from the rich to the poor through property and inheritance taxes, neither of which exist in China. “What he found fundamentally changes the way we think about China’s economy,” says Tom Orlik, chief Asia economist at Bloomberg Intelligence. “China doesn’t face the challenge of building a welfare state but ensuring more equal distribution of wealth and income, which is much harder.”

Gan’s research on China’s housing sector has also made waves. He figures that 70 percent of total household wealth is made up of the value of apartments. About 50 million already-sold units sit empty, much more than some investment banks had estimated. (The government doesn’t release national data on empty apartments.) China has a vacancy rate of 18 percent, compared with 13 percent in the U.S., Gan says.

Although his data were at first contested by property developers, now they are more widely accepted. That’s one reason officials are reducing housing inventory. “With policymakers mainly in Beijing, a city with rising housing prices, they assumed that China needed more apartments,” Gan says. “Now the policy has almost 180 degrees turned.”

Gan’s reputation has strengthened his relationship with officials. When some suspicious villagers seized his students’ computers during a survey in 2013, Gan flew to Beijing and met with a department director at the statistics bureau to ask for help. After confirming that the survey was legal, the bureau got the equipment back. “I was told that a senior official at the People’s Bank also put out the word that our work is good and should be supported,” Gan says.

Gan has his detractors. His Gini coefficient estimate of 0.61 was unbelievably high, with the real figure now closer to 0.45, says Li Shi, an economist at Beijing Normal University, who uses data the statistics bureau collects. Gan’s survey sample is skewed by focusing on rich urban areas and excessively poor villages, Beijing Normal’s Li says.

For the 2017 census, Gan wants to gather more information on the movements of migrant workers and on the fast-growing rural land market. There are always more questions to ask.
 
—With Xiaoqing Pi

The bottom line: According to economist Gan Li, income inequality is the most pressing economic problem in China.

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