Wealth gap 'spreads across Asia'

China's growth has its downside

The gap between rich and poor has widened sharply in China and many other Asian countries as their economies have boomed, research has suggested.

The Asian Development Bank (ADB) found that relative inequality had widened more substantially in China than any other Asian country except for Nepal.

Other countries with rising wealth gaps include India, Cambodia and Sri Lanka.

More spending was needed on education, training and healthcare to alleviate the situation, the ADB argued.

Lagging behind

The bank said the main reason for widening wealth gaps in recent years was the discrepancy in investment between urban and rural areas which favoured better-educated, better-off urban populations.

Improvements in rural infrastructure were being held back by government policies which deterred private investment.

Growing inequalities can weaken social cohesion Ifzal Ali, Asian Development Bank

Relative inequality, measured as the change in proportionate differences in income between the richest and poorest in society, has risen in 15 countries studied since the early 1990s, according to the bank's Key Indicators 2007 report.

In only six - Indonesia, Mongolia, Malaysia, Kazakhstan, Armenia and Thailand - did it narrow over the period in question.

Although basic poverty levels have fallen as Asian economies have expanded, the living standards of the wealthiest in society have improved at a much faster rate, leaving the poorest lagging even further behind.

While increased income disparities were not unusual in countries such as China experiencing rapid economic growth, the ADB said such extreme differences were socially harmful.

"In a region as dynamic and vibrant as developing Asia, low growth in incomes of the poor is reflective of weakness in the pattern of growth," said Ifzal Ali, the ADB's chief economist.

"Growing inequalities can weaken social cohesion."

Social friction

Urban-dominated growth in China and India has caused social friction as a result of the high levels of migration to cities and a shortage of foreign investment in more isolated areas.

But the ADB said the answer was not to try and turn back the tide of globalisation but to ensure employment opportunities were made more widely available.

"Inequalities in life start early and they begin with extreme circumstances that deny millions the opportunity to have adequate nutrition, health and basic education," it noted.

Governments must ensure their health and education programmes were "targeted" and implemented in a way which did not destabilize the overall economy, the bank added.