The Effect of China’s Educational Inequality on Inclusive Growth

Authors: Truong Dam Linh Giang, Zhang Yuhang

Research Head: Aces Low Ying Xuan


In 2021, Beijing announced the total eradication of absolute poverty in China. On the other hand however, their GINI coefficient has been progressively increasing to become one of the world’s highest. Although education has been a huge driver of its economic growth, the lack of educational equality has contributed towards the growth in the GINI coefficient. The nature of China’s education inequality lies in the differences in the development of its urban and rural areas (Zhang & Liang, 2021).

Fig 1: Disparity among provinces in terms of GDP per capita, No. of tertiary institutions, urbanisation rate and disposable income (Source: Statista by C. Textor)

Those living in rural areas tend to come from lower income families who cannot afford to pay for higher quality education. As the economy transitions from manufacturing to more knowledge-based jobs, there is a higher emphasis on educational attainment. Accordingly, economic opportunities created by growth are increasingly unavailable to those coming from less wealthy families (Zhang & Liang, 2021).

China’s Education System

Although the Chinese government mandates 9 years of compulsory education, and fully covers the cost of school fees, this does not include the cost of textbooks, uniforms and other possible additional charges for school fundings (Pang, 2021). Students are allocated to schools based on geographic distance, conferring an advantage to those whose parents can afford premium land near popular schools. Apart from public schools, parents may also choose to send their children to private primary and secondary schools, which are mostly profit-driven and rarely funded by the government. The hallmark of such schools includes a more flexible curriculum whose pace is more appropriate for students, and the class size is usually around only 20 students, compared with the one of exceeding 40 students in public schools (Connor, 2020). This leads to higher quality of education in private schools. However, the cost of private schools are usually over 100 thousand CNY per year while the average annual salary for employees working in urban areas is lower than this number (97 thousand CNY), and some of them would filter the students by exams and interviews (National Bureau of Statistics of China, 2021).

All this hard work usually leads the students to the one big and terrifying exam - Gaokao, the Chinese college entrance exam - which could determine a student’s future in terms of job prospects, salary and the standard of living for even their descending generations. Alternatively, a considerable number of parents have been preparing their children for overseas education since kindergarten. The number of students going abroad has been increasing across these decades, leaving the harsh competition to the ones who cannot afford the cost for going abroad. As we can see in the diagram below, the number of students going overseas for studying has been increasing across at least one decade. However, this choice is not affordable to most families, as the number of candidates attending Gaokao is around 1,000 million every year. (Ministry of Education (China), 2021).

Fig 2: The number of students going abroad for study (Source: China statistics book 2021)

According to research on estimating the education return in China, an additional year of education can increase the income by nearly 18% (Churchill & Mishra, 2018). Since the future of the student might be significantly determined by the foundational education, innumerous families turn to tuition for help. The private tuition industry in China saw a high of US$70 billion before the ban from the government (Zhou, 2021). In 2021, the government clamped down on the for-profit after-class private tuition to reduce the pressure on students and improve their mental health (Stevenson & Li, 2021). Only centres that have registered as non-profit entities and offer extra-curricular courses outside of school syllabus are allowed to legally operate, which worsened the situation of unbalanced accessibility to high quality of extracurricular activities. Furthermore, home tuition is still allowed, which means the children whose parents are able to pay home tutors will benefit from the ban. There are also black markets resulting from the ban (James, 2021), exacerbating the access to educational resources.

China’s top universities are mainly located in big and wealthy cities. Simultaneously, we see a disproportionate number of students from the same big and wealthy cities getting into good universities (Fu, 2018). As represented by the graph below, the students from relatively wealthier provinces possess a higher chance of being admitted to good universities. This results from multiple factors such as the concentration of education funding to the big and wealthier provinces and cities, leading to a toxic and spiralling trend in prioritisation of students from wealthier areas.

Fig 3: The provinces with higher GDP per capita and disposable income are associated with higher admission rate to good universities

Other than turning to tuition services, school facilities and quality of education limited by fundings are also main contributing factors to education inequality. For instance, the best high school in Shenzhen, one of the most developed cities in China, released a list of new teachers who are mostly PhD graduates. The capability of the school to employ such high quality teachers is due to the generous starting pay of approximately more than 3,000 USD, a considerably high salary if we compare this with the country’s average monthly earning of 1,225 USD (National Bureau of Statistics, 2020). On the other hand, the schools in rural areas face shortages of good teachers, incomplete curriculum and lack of teaching facilities (Han, 2018). The differentiation among areas is getting more and more serious due to the fast and unbalanced development.

Factors limiting Quality & Quantity of Education in Rural China

The quality of education in rural China is often limited by insufficient investment in education. The funding for education comes from the lowest levels (villages, township and county) (Knight et. al., 2009). These regions also tend to have lower tax revenues compared to more developed urban areas, and hence have a higher tendency to face fiscal pressures. In response, they divert their spending from education to other pressing matters that can generate more government revenue such as infrastructure and real estates.

Though the Gaokao is standardised across the country, the education curriculum is not. In rural areas with lower means to invest in education, there is often a lack of a complete curriculum and pedagogy fitted to the needs of the students (Han, 2018). Consequently, their preparation for the Gaokao is limited and they are less likely to get into a university. Down the road, these students also face a lower chance of getting higher income jobs that may require university degrees.

As funding comes from local instead of central government, teachers in rural areas tend to be paid less than their urban counterparts (Thelwell, 2020). There have been many cases of one teacher having to teach multiple classes and subjects, some of which they might not have been trained in (Zhang, 2009). Due to their heavy workload and lack of proper compensation, there has been an increasing trend in teacher burnout. Coupled with the incomplete curriculum, rural students’ education is heavily compromised compared to students from urban towns. Similarly, this can lead to non-inclusive economic growth in the next generation.

Lastly, China’s education doctrine has been intolerant of other cultures present in China, especially that of ethnic minorities. In regions where there is a high concentration of ethnic minorities, which tend to be rural areas (Fig 4), there is also a high record of student absenteeism & low rate of tertiary education attainment (Yang et. al., 2015). The aforementioned paper attributes this to differences in languages and cultures.

Fig 4: Share of ethnic minorities in the population of China’s minority autonomous regions in 2020, by province or region (Source: Statista)

Factors Limiting Quality of Education in Urban China

China’s housing prices have always been a pressing issue, but has evolved to become one of the main determinants of income distribution among cities and provinces. The housing price of urban cities (e.g. Beijing, Shanghai) could easily break 30 thousand CNY (S$6,000) per square metre, while that of rural cities fall around the range of 6 thousand CNY ($1250) (Fig. 5). Researchers have noted a correlation between distance from popular schools in urban areas to the price of land. They thus posit that since students are allocated to public schools by distance, residential areas near popular schools are in higher demand. To visualise this phenomenon, residential areas near popular primary schools such as Fengniao Residential Compound have seen prices jump by 31% year-on-year in 2021 (Wan et al., 2021). Hence, the wealthier families spend a lot to put their children into good schools by purchasing small but expensive houses. The interaction is mutually reinforcing as those who enrolled in more popular schools also tend to get better jobs, leading to a higher ability to pay for houses near their childrens’ popular schools.

Fig 5: Average sale price of real estate in China in 2020, by region (in yuan per square metre). (Source: Statista)

A contemporaneous analysis of China’s educational inequality would not be complete without discussion of its tuition market. In 2021, Beijing placed a harsh restriction on the tuition industry. Those offering curriculum-based tutoring must be converted into non-profit institutions and cannot be listed for financing (Koty, 2021). To meet the surging demands for tutoring, the Beijing Municipal Commission of Education is also adding free online tutoring services (Dangor, 2021). However, there is scepticism whether the free online service would be of good quality. Wealthy parents are still seeking private tutoring through black markets that have popped up. Some are advertised as “providers of housekeeping and childcare services” or “professional nannies” (James, 2021). The black market could exacerbate the distribution of educational services further, leading to unequal educational attainment and income distribution.

The recent Gaokao reforms in 2019 have increasingly placed the emphasis on holistic education. Those who can afford non-curriculum-based tuition stand to gain more from these reforms. Contrastingly, those from rural areas with less access to tuition services might also be further disadvantaged (China Policy, 2019).

Policy Recommendations

A popular solution on Chinese forums has been fiscal transfers. Excess budgets from richer provinces are transferred to poorer provinces with lower investments in education (Duan & Zhan, 2011). However, empirical studies from Zhao (2009) have shown that China’s fiscal expenditures are decentralised, indicating that provinces and local governments can freely choose their own budget expenditures. On the other hand, revenue streams are largely centralised; the central government still retains large control over how individual provinces generate revenue. Therein lies a new problem: even with increased budgets, local governments might still invest their revenue in other industries that yield more revenue in the short run (Duan & Zhan, 2011). Therefore, we do not agree that fiscal transfers might aid the current educational inequality. On the other hand, a more comprehensive solution would be a reform of the tax system in China. Rather than having centralised revenue generation and decentralised expenditures, there should be higher emphasis on minimum expenditures on education.

To address other issues faced by urban regions, there could be more considerations into more upskilling grants. The sentiment that the Gaokao would decide one person’s life once and for all has permeated throughout Chinese society (Zilan, 2021). Further, as a largely developed economy operating at close to full potential output (Zhu et. al., 2019), there is high emphasis for all citizens to be highly educated. This conferred mobility allows them to transit out of sunset industries and into sunrise industries (Woetzel et al., 2021). Lastly, the upskilling serves to remind students that their fates are not locked in stone just because they did not do well during 1 exam. This reduces both the demand for tuition and houses near popular schools.


In conclusion, the educational inequality in China is a nuanced issue. Both rural and urban areas face educational inequality, albeit of different magnitudes. Rural areas tend to face lower education investment leading to incomplete pedagogy and teacher burnout. Minority groups also face higher rates of absenteeism as they feel unwelcomed by the educational doctrine. In urban areas, soaring housing prices and the tuition ban have worsened the distribution of education resources. Comprehensive policies that can address all facets of this issue are fiscal reforms and increased investment in lifelong learning.


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