This paper by James K. Galbraith, Sara Hsu, and Wenjie Zhang explores the relationships between inequality, trade and capital flows into China since the early 1990s. Authors show that the rise in inequality in China since 2000 has more to do with the speculative activities associated with China’s building boom, notably in Beijing, than with the massive growth in manufacturing employment and in Chinese exports since China joined the WTO in 2001. The paper also reports further research on the likelihood of large speculative inflows of capital into China via the current account. The flow of profits from the export boom has, most likely, fed the speculative fires.
Galbraith, James K., Sara Hsu, and Wenjie Zhang. 2008. The Beijing Bubble: Inequality, Trade and Captial Inflow into China. UTIP Working Paper No. 50. Austin: University of Texas Inequality Project.
Full text: utip.gov.utexas.edu/papers/utip_50.pdf