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Bridging the gap

Kevin Song | Wednesday, October 30, 2013

The Great Wall, xiao long bao, mooncakes, endless shopping, Peking duck, Forbidden City, giant pandas. These are all things associated with the great People’s Republic of China. This past week, 11 other students and I traveled to Beijing and Shanghai as part of the Global View Initiative sponsored by Student International Business Council (SIBC) and Peking University.

We spent the week competing in a case competition, sightseeing, stuffing ourselves full of food and learning about Chinese culture and the odds-defying economy. We heard lectures from top-notch economics professors and rode a Six Flags-like (but sketchier) metal slide down the Great Wall. We took one of the world’s fastest commercial passenger trains from the heart of Chinese culture in Beijing to the bustling center of commerce that is Shanghai, completing the journey that’s almost the distance same distance as from Washington, D.C. to Orlando in less than 5 hours.

But one thing glared in our faces as we sat through economics lectures: the huge income disparity between the rich who have thrived in the past decade and the poor who have struggled along. In Shanghai, we walked into a poorer area, filled with street food and locals wearing shirts yellowed with dust and dirt, but later, we found ourselves at one of PricewaterhouseCoopers’ offices in the city, with none other than a McLaren dealership at the base, selling supercars ranging from 3.7 million yuan ($597,000) to 13 million yuan ($2.1 million).

The income gap has pushed prices of name brands like Nike up sky high in China – because they can charge those prices and still have customers with a never-ending thirst to buy. It seems that there are as many Audi’s and Mercedes-Benz’s as there are run down cars and no-name brands. A pair of name brand jeans cost $50 in San Francisco and $115 in Beijing – but there are plenty of off-brand jeans are available too.

What about prices of things that aren’t inflated because of the name it bears? An apartment in San Francisco, a city known for high housing prices, has an average cost of $6,700 per square meter, while an apartment in Beijing would cost 20 percent more at $8,100 per square meter. But yet, the average after-tax monthly disposable salary in San Francisco sits at $6,078 while citizens in Beijing earn only $843.

How does this happen? How do people survive?

The answer is, for now, that several generations of a family purchase a house together. But China’s one-child policy makes it so that one couple ends up supporting four parents and eight grandparents. This system isn’t sustainable for long. As the income gap widens even further in China, how will the government react? Do they need to fix it? Can they fix it? Nobody knows.