Mar 23, 2017 - World

The U.S. redistributes far more income than Red China

Data: Standardized World Income Inequality Database, Version 5.1; Chart: Andrew Witherspoon / Axios

The above chart, drawn from the OECD's recently released annual review of the Chinese economy, shows the difference in income inequality after redistribution. There is almost no net income or wealth redistribution in China, despite its professed egalitarian ethos, and that's a big problem for the global economy.

Why it matters: China's economic growth has been reliant, to an historically unprecedented degree, on investment in infrastructure, plants and equipment. But China has more such capital than it needs, and now investment is being funnelled to projects that will never justify their costs. This will inevitably slow the Chinese and global economies as inefficient investments weigh on growth.

China's next move: Economists say that China should shift its tax burden from sales taxes to those on high earners, while boosting social security spending and investments in education. These changes, however, are being resisted by powerful forces in Chinese society that benefit from the imbalanced distribution of resources.

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