China’s is an important economy. It accounts for about 20% of world population and for
nearly 20% of the world’s poor. Moreover, it is becoming more important. During the period
of economic reform – roughly the last 20 years – it has achieved a remarkable rate of
economic growth: something like 8% per annum. By comparison with other communist or
ex-communist countries, it has so far made a smooth transition from a planned economy
towards a market economy. The Chinese economy presents fascinating challenges to
economists, and Keith Griffin was one of the first Western development economists to accept
the challenge (for instance, Griffin and Saith, 1981, Griffin and Griffin, 1983).
As a group we first teamed up with Keith Griffin as members of an international
project on income distribution in China, with he led with Zhao Renwei. The project was
based on a very detailed and representative national household survey, designed by the team.
It was an improvement on official surveys because it permitted empirical analysis at the
micro (household and individual) levels, and because it used a broader definition of income,
including the various forms of payment in kind which were important in China. The main
output of the project was the book edited by Griffin and Zhao (1993). One of the most
startling figures to emerge from it was the ratio of urban to rural household income per
capita, which had a value of no less than 2.4 to 1. Recognising that this rural-urban divide
deserved further study, we decided to accept the challenge (Knight and Song, 1999).