Tea Leaf Nation

Mapping the Four C's of Chinese Wealth

Live in a city near China's coast, and in a capital. (Coal doesn't hurt.)

SHANGHAI — Conversations about China have long stopped asking if decades of breakneck growth have widened the gap between rich and poor. English-language media is now more likely to focus on whether the country's inequality is merely as deplorable as the United States', or if it has already joined Latin America and sub-Saharan Africa to become one of the globe's most socially stratified places. The map below gives a vivid picture of that (click any image to enlarge):

China's inequality is regional, as it is in many large countries. Terms like "wealthy coastal provinces" and "impoverished interior" are now well-worn sayings in any China hand's phrase book. Most English-language discussions of China's regional inequality stop there, or at most focus on differences between the country's 31 provincial-level regions. The risk of overlooking finer-grained trends looms large, given that many Chinese provinces are larger than entire countries in both size and population.

This forms a stark contrast with the United States, where the accessibility of census data and mapping tools has filled the Internet with detailed cartographical exposés on the nation's haves and have-nots. In China the problem is not lack of interest, but a paucity of publicly available digital data; maps as fine-grained as these U.S. county-level ones are a challenge to compile when some of China's data must be downloaded off online gray markets or entered by hand from pricey official statistics books, and the few Chinese maps that are produced rarely cause ripples beyond the Chinese-language Internet. 

The map above attempts to provide a more detailed look at Chinese income inequality by using the 2012 China Statistical Yearbook for Regional Economy, the most recent book of regional data available from the nation's second-largest public library. The Yearbook provides data for China's 300-plus prefectures: subprovincial administrative units covered by a mix of towns and farmland whose largest cities are designated as prefectural seats. The Yearbook also contains separate per capita income data for each prefecture's urban and rural dwellers, but the map combines them into a weighted average based on urbanization rates. (While the rural and urban income metrics differ slightly, they are the most comparable metrics the government produces, and Chinese analysts frequently compare the two when calculating the urban/rural income gap.)

Analyzing China at the prefectural level both confirms and complicates widely held views of the nation's wealth gap. Parts of the coast are indeed above the national average, but many other pockets of wealth lie scattered around the country. How did so many parts of China's supposedly poor interior manage to achieve above-average incomes? Much of China's geographic income gap can actually be explained with a few patterns. Let's call the following list "the four C's" for ending up on the right side of China's regional inequality.

1. Cities:

This ingredient for wealth is likely obvious to those familiar with China's gaping urban-rural divide. The Statistical Yearbook shows that peasant incomes are only about a third of urbanites'. Since this article calculates a prefecture's per capita income as a weighted average of its rural and urban incomes, the level of urbanization will play a huge role in determining whether the prefecture beats the national average, as more urbanized prefectures are weighted more heavily toward higher urban incomes.

It may seem easy to conclude that massive-scale urbanization (such as that proposed by the central government in March 2014) is the key to addressing China's regional inequality. The map below shows this hope may be misplaced. Even when filtering for only urban incomes, China remains a divided place:

Urbanization will undoubtedly help to improve people's lives, but regional inequality has other causes that must be explored as well.

2. Coast:

The coastal advantage is real. Common in most countries, in export-heavy China this phenomenon has been driven by policies that privileged coastal investment and development in the early days of the country's reforms. The growth of factory towns and bustling trading cities has propelled the rise of incomes up and down China's coastal prefectures. Of 53 prefectures abutting the Pacific Ocean, 37 have above-average incomes, and eight of China's 10 richest prefectures sit on the coast.

Despite this, the maps show the term "rich coastal provinces" to be a bit of a misnomer. Zhejiang province is the only coastal province in which every prefecture boasts incomes above the national average -- all of the others have at least a few underperformers. Take Guangdong, regularly considered one of China's richest and most developed provinces. Its wealth is highly concentrated in the industrial metropolises of the Pearl River Delta -- the area where the Pearl River meets the South China Sea -- which is surrounded by a relatively poor hinterland. Census data reveals that Pearl River Delta cities like Guangzhou, Shenzhen, and Dongguan combined contain just over half of Guangdong's 100 million residents, meaning that the other half live in underdeveloped outer regions. 

3. Capitals:

China's capitals are almost invariably their province's or region's largest cities by population and economic size. Home to government bureaus and the regional headquarters of state enterprises, they also enjoy well-trained workforces and good infrastructure that make them the first stop for inbound investment. The virtuous cycle of investment and development helps ensure the capitals grow large populations of high-earning urbanites, often making them islands of wealth amid seas of relative poverty.

Even capitals that fail to surpass the national average still maintain an edge over the poor provinces they administer. Every capital is significantly richer than its province's or region's average, ranging from a premium of 11 percent for Fuzhou, capital of Fujian, to Xi'an, whose residents' incomes are nearly double the average of the province of Shaanxi.

4. Coal:

Coal in this case refers not just to coal, but to natural resources more broadly. But coal does explain the most famous example: The city of Ordos, occupying an otherwise desolate patch near the Gobi Desert, has grown rich and urban because it sits on over 10 percent of China's coal reserves. Resources also explain several of the other rich prefectures in otherwise poor areas, such as Karamay in Xinjiang, Baotou in Inner Mongolia, Daqing in Heilongjiang, Golmud in Qinghai, and Panzhihua in Sichuan.

Of course, natural resource abundance alone is not a guarantor of high incomes -- just see coal-rich Shanxi -- but in otherwise poor, sparsely populated areas, it can foster the development of urban mining and service economies that boost the overall economy and raise individual wealth as well. 

Studying China's income gap at the prefectural level is valuable, if for no other reason than it gives a slightly closer glimpse at the contours of Chinese inequality. There may be no guaranteed way to get rich here -- but this data at least shows where the odds are best.

Images copyright Foreign Policy. Do not reproduce without permission.

Tea Leaf Nation

The Formula for Chinese Web Riches: Ugly but Fast

A 'web designer's nightmare' can mint money if it successfully targets China's middle class.

Chinese online recruiter Zhaopin.com -- zhaopin means "to hire" -- is not a pretty site. Those surfing to the homepage are met with hundreds of logos and brands crammed together like bumper stickers. But looks are deceiving: Zhaopin Ltd is one of many domains on the Chinese Internet that are ruthlessly utilitarian, all about clicks and revenue, and with little care for design. They may be tough to look at but they're lucrative. Case in point: With its May 5 application to list on the New York Stock Exchange, nicely timed to tap the buzz surrounding Chinese e-commerce giant Alibaba's IPO, Zhaopin is positioned to rake in an expected nine figures. 

Launched in 1997 by a Brit and a Canadian who went to China to study Mandarin and ended up starting a business, Zhaopin is a dinosaur by Chinese Internet standards. It's since changed hands and today is majority-owned by Melbourne-based SEEK Investment Pty Ltd, but its veteran status remains a leading strength. Good marketing, including clever TV spots like this one showing the toll of a lousy job on an office worker, helped it grow into a solid brand with 74 million users, the most of any Chinese job site.   

Co-founder Steven Chiu told Foreign Policy that when the site got its first venture capital in the late 1990's, the company mainly spent it on marketing. "We spent it on doing the things you're supposed to do as a young Internet company: advertising on billboards, on subways, on buses and on TV," said Chiu, who is now based in Paris and says he has no financial ties to Zhaopin. "It had a big impact, making Zhaopin a household name in China." 

What they didn't splash out on was web design. "The site is ugly," says Chiu, who now works for a startup education website, HSTRY.org. "It really hasn't changed at all in 10 years. We weren't in the business of trying to make the best looking website." Instead, "we knew how we could monetize and we did it." 

Industry analyst David Wolf told FP that China's leading sites tend to be eyesores. Many popular sites, including top portal Sina.com, are a "Web designer's nightmare," Wolf, managing director of public relations firm Allison+Partners' China practice, said. But "function trumps form at the moment on the Chinese Internet."

For Zhaopin, as with many others, the formula works. Recent college graduates hunting for jobs, like 24-year-old Li Xinze, a Beijing interior designer, automatically turn to Zhaopin. It's no surprise: the site has been around since Li was seven. "It's convenient and very fast," said Li, who says she found her last two jobs online. Mark Natkin, managing director of Beijing-based Marbridge Consulting in Beijing, told FP that Zhaopin "draws much of its advantage not from any particular differentiation of services provided but rather from being an early entrant." 

Zhaopin's IPO timing, at least, is impeccable, coming just as Alibaba prepares for a listing that could bring in as much as $15 billion, more than Facebook garnered in its IPO. For its part, Zhaopin has a financing target of $100 million, a ballpark that Wolf says is "midrange to modest." "They're not asking for the world," he said. "They really want to surf this China high." 

It may feel like a high for investors, but young Chinese are facing a murkier picture. Last year, Chinese media dubbed 2013 the "worst job market in history" because it saw a record number of college graduates -- 7 million -- enter the labor force. This year, there will be an additional 4 percent, or more than 7.2 million. Zhaopin may be less aspirational than LinkedIn, which in Feb. 24 launched a Chinese beta site with a name that means "select the elite," but that's part of its appeal as a space for the kind of low-to mid-range white-collar jobs that China's college grads covet. It's not currently geared toward the factory worker looking to assemble iPhones but instead toward the IT grad hoping to land a position at a Genius bar in an Apple store in Beijing or Shanghai. To take one example, positions posted by state broadcaster China Central Television including a Japanese translator and an on-air host for a shopping channel. 

The site's other useful features include a section for job counseling, where members ask questions like: "Is it legal for a company to demote you and cut your pay when you get pregnant?" or "I am 49 with a lot of experience in sales management, why can't I find a job?"  

But Wolf says college graduates aren't the only key demographic on the job market. Chinese of all ages are increasingly using the Internet to manage their careers because more people are moving to the cities and getting online. China now has 731 million long-term urban residents and 618 million people online, figures that grew 1.2 and 9.5 percent respectively from the previous year. They will have to jostle with millions of other Chinese to land a good job, but that's just fine for Zhaopin and companies like it. "The growth numbers," Wolf concludes, are "extraordinarily promising."

Image: Fair Use