Expansion of public transfers in China: Who are the beneficiaries?

With expanded fiscal capacity and rising concerns over economic inequality, the Chinese government in the last decade and half has vastly rebuilt and expanded its social welfare regime. Using the National Transfer Accounts (NTA) methodology and both micro-level survey data and macro-level government statistics, this paper examines the distribution of public transfers in education, health care and pension across generations and income groups in 2014 and compare it with those in 2010. While per capita public transfers in absolute terms remained in favor of higher income groups and the elderly in 2014, as in 2010, the gap in receiving public transfers between the rich and the poor was reduced notably in this short time period. Public transfers also became more progressive in relative terms, with the bottom income group receiving much higher public transfers relative to their per capita household income than the wealthier groups. Our results reveal that although the unequal distribution of public transfers continues and it in part results from the fragmented program design and the legacies of socialist inequalities, China's expanded social welfare programs have contributed to narrowing the vast income inequality in this country.