China's Best-Kept Secret: The Surprising Robin Hood of the East

China, often criticized for its growing wealth gap and limited social safety net, has a surprising secret: its government is more redistributive than meets the eye. Despite being known for having a relatively stingy tax-and-transfer system, China's government has been quietly working to address income inequality and reduce poverty.

One of the primary mechanisms behind China's redistributive prowess is its system of local taxation. While the central government sets national tax policies, local governments have a significant amount of discretion over how to allocate funds. This has led to a proliferation of local programs aimed at supporting low-income households and promoting social mobility.

One notable example is the dibao system, a program that provides a guaranteed minimum income to certain segments of the population. Introduced in the 1990s, the dibao system has undergone several iterations and expansions over the years, with a growing focus on supporting the most vulnerable members of society. Today, the program covers millions of people across the country.

Another area where China's government has demonstrated a commitment to redistribution is in healthcare. The country's healthcare system has undergone significant reforms in recent years, with a renewed focus on expanding access to care for low-income populations. While challenges remain, the government's efforts have helped to increase the percentage of people with health insurance from less than 20% in 2003 to over 90% today.

Education is also a key area where China's redistributive policies have had a significant impact. The government has implemented a range of initiatives aimed at reducing the cost of education for low-income families, including subsidies for school fees, book expenses, and even living costs for students from rural areas. These efforts have helped to increase access to education for millions of people who would otherwise be unable to afford it.

Despite these efforts, however, China's tax-and-transfer system remains relatively limited compared to many other developed countries. The country's tax revenue as a percentage of GDP is among the lowest in the OECD, and the government's social spending is similarly constrained. As a result, many areas of the social safety net remain underdeveloped, and the country's redistributive policies are often patchy and inconsistent.

Looking ahead, China's government faces a number of significant challenges as it seeks to address income inequality and promote social mobility. The country's rapidly aging population, combined with declining workforce growth and rising healthcare costs, threatens to put a significant strain on the social safety net. Meanwhile, the government's ongoing anti-corruption campaign and broader efforts to reform the state-owned sector are likely to create winners and losers, potentially exacerbating existing inequalities.

Despite these challenges, China's redistributive policies are an important part of the country's efforts to promote more equitable economic growth and reduce poverty. By expanding access to healthcare, education, and other essential services, the government can help to create a more level playing field and provide opportunities for all citizens to succeed. While much work remains to be done, China's surprising redistributive record is a welcome sign of progress in this area.