COLUMN ONE : The Income Gap: Tale of 2 Chinas : Under Deng, the goatherd moves out of poverty--but the businesswoman gets rich. Beijing’s policy of letting some prosper faster than others helps to boost the economy, but inequities may threaten stability.

Zhou Wei manages a department store in this prosperous eastern Chinese city and lives in a new three-story townhouse.

Wang Baocai raises goats in Zhujiagou village, 600 miles away in north-central China, and lives in a cave.

Despite the stark contrast in living conditions, Zhou and Wang have prospered during the 16 years of economic liberalization since senior leader Deng Xiaoping took power and turned Maoism on its head.

Wang, 46, freed from collective farming by the economic reforms, manages a herd of 40 goats and last year made nearly $900 for his seven-member household. Two black-and-white television sets flicker in his home dug into the yellow earth of Shaanxi province.

“Before reforms, none of this would have been possible,” said Wang, motioning proudly toward his modest hillside property. “Fifteen years ago, we did not have enough to eat. No one could own private goats.”

But Zhou, a stout 47-year-old woman who manages the Island of Dreams Shopping Center in Wuxi, a bustling lake city 60 miles northwest of Shanghai, has benefited even more. She owns several homes, a Dodge Caravan and takes home $2,500 a month--more than 30 times Wang’s income.

Both started the Deng era relatively equal. Wang is a little richer than when he started. Zhou is rich.

This gap between the businesswoman and the goatherd represents what some feel is the biggest challenge to China’s ability to hold together after Deng, who is 90 years old and ailing, passes from the political scene. Under increasing attack is the Communist Party’s own version of the “trickle-down theory,” which allows some people to get rich faster than others in order to raise the level of the overall economy.

China’s coast is much richer than its interior. Its city dwellers are much richer than the peasants of the vast rural landscape, where 80% of the population lives. State workers have fallen far behind those in the private or semi-private sector.

Seeking a piece of the action, an estimated 100 million Chinese have taken to the road, migrating to the coasts and cities in search of work.

According to several leading Chinese economists, the gap in the rate of growth between interior and coastal, rural and urban, public and private continues to widen. To many, this poses potentially grave stability problems for the post-Deng era. Drawing on a long history of peasant uprisings during periods of overtaxation and economic hardship, the doomsayers predict chaos and rural anarchy if the central government does not soon correct the imbalance.

“No matter how I do my calculations,” said Hu Angang, a researcher with the Chinese Academy of Science, “the absolute gap between rich and poor regions is rapidly enlarging.” Hu, 42, a former Yale University graduate student, is the author of several alarmist books on the growing inequities of income distribution in China that have a wide following in the Communist Party senior leadership.

Hu and other advocates of a stronger central government want to reverse the decentralization process that characterized the early stages of the Deng era. In 1994, Hu was one of the authors of a bill that took away some of the tax-levying powers of the provinces.

The next push is expected to come this fall during the Communist Party plenum debate over China’s ninth five-year plan. Although it has not yet been announced, the stronger central government faction within the party--sometimes described as the “neo-authoritarian” wing--is expected to sponsor a tax on richer provinces, with proceeds redistributed to poorer areas to promote more even growth.

Such a move will be strongly opposed at the provincial level, especially in the more prosperous coastal areas. To prepare for the debate, Hu and other influential writers such as Yale University professor Wang Shaoguang and Shanghai historian Xiao Gongqin have produced a prodigious amount of research and literature.

“What we are trying to do,” Wang said during a recent visit to Beijing, “is avoid the worst-case scenario for China--disorder, chaos and civil war.”

In one study, Hu compared China’s richest metropolitan area, the eastern port of Shanghai, with the poorest province, landlocked Guizhou. He found that in 1991, Shanghai’s per capita gross domestic product was 7.4 times that of Guizhou. One year later, Shanghai’s per capita GDP had jumped to 8.4 times that of Guizhou.

In 1990, Hu said in an interview with The Times, the gross domestic product for each Shanghai resident equaled $900 more than that of each Guizhou resident. By 1993, the difference had doubled.

Some foreign scholars strongly disagree with Hu’s findings. University of Michigan social scientist Huang Yasheng, a former World Bank official, contends that the gap between China’s haves and have-nots has actually decreased during the Deng era.

In a telephone interview, Huang said a highly sophisticated study of the Chinese economy has just been conducted under the supervision of Harvard economist Jeffrey Sachs that supports his conclusion.

Who Gets Rich?

Few issues in China are as politically charged as income distribution. At its heart, said Xiao Gongqin, 48, a professor at Shanghai Teachers’ University who writes on the Chinese political scene, it is a debate between those who favor “letting a few get rich first” and those who advocate a national policy of “getting rich evenly.”

In a recent survey conducted at the Central (Communist) Party School meeting in Beijing, senior Communist Party bureaucrats from all over China listed the “unevenness of economic development” as the main problem facing China.

The debate is not restricted to the country’s political think tanks. Because of television, which reaches more than 80% of China’s 1.2 billion people, residents of even the remotest regions see advertising images of coastal wealth.

The TV commercials show long-limbed actresses reclining in giant bubble baths in cavernous bathrooms fitted with chrome. Shanghai businessmen are shown making deals on cellular phones.

For the first time in modern Chinese history, the contrast between affluence and relative poverty exists inside China itself. It is no longer simply a question of the developed world versus the developing world.

By most measures, eastern coastal cities like Wuxi, here in the booming Yangtze River delta, have joined the developed world. Wuxi, where Island of Dreams manager Zhou Wei lives, is on everyone’s list as one of the most dynamic, prosperous cities in China.

More than 4 million people live in the greater Wuxi area, in what local boosters term the “Golden Yangtze Delta.” The city has an aggressive public relations team of local officials armed with slick charts and pamphlets extolling its virtues.

In four years, few places in China have grown faster than Wuxi. Between 1990 and 1994, the per capita GDP more than tripled from $454 to $1,717--bringing it to nearly seven times the national average of $305. Wuxi is one of 19 cities in China that have surpassed an annual rate of $1,000 per capita GDP.

The relatively affluent demographics made it an attractive place for the Hong Kong and U.S. partners who invested in the Island of Dreams store.

The four-story store of more than 100,000 square feet is arranged with perfume and handbags on the lower floors and furniture and appliances on the upper levels.

The mostly female sales staff sports American flag-motif ties. General manager Zhou, a native of Hunan province, said the flag idea came from her husband, Los Angeles businessman William Lee, who is a partner in the store.

“We are aiming at a market of mainly young and middle-aged people whose income is mid-range or higher,” said Zhou, who said she hopes some day there will be dozens of Island of Dreams shopping centers across China. “Most of our customers are white-collar [workers] who make beyond 1,000 renminbi [$125] a month.”

Of course, not everyone in Wuxi fits into the Island of Dreams target population.

Feng Zhengliang, 47, is a tough riverboat captain who lives in Wuxi and pilots a government passenger boat on the Grand Canal route to Hangzhou. A veteran of 25 years on riverboats, Feng makes 500 renminbi ($60) a month.

Prosperity Passes By

When the economic reforms began 16 years ago, a government job as captain on the Grand Canal was the envy of Wuxi. Feng achieved his dream but watches sadly as his fixed salary leaves him out of the new prosperity.

On a recent 12-hour voyage to Wuxi from Hangzhou, Feng pointed to the hundreds of privately owned motorized barges that now ply the canal.

The barge owners, wives and families carry coal, sand, bricks and other materials to building sites. By working long hours and using their craft as their floating homes, they are able to earn several times Feng’s fixed salary.

“I’m proof that not everyone in Wuxi is rich,” Feng said.

For the residents of Zhujiagou, the village where goatherd Wang Baocai lives, the Island of Dreams might as well be Fantasy Island. Although most of the 80 families in his village have electricity, there is no telephone for miles.

The village laundry is the tiny creek at the bottom of the hill. According to village Communist Party secretary Gao Yanan, 34, the per capita annual GDP of Zhujiagou is about $90, less than one-third the national average.

The village is in the Yanan Valley, about 40 miles east of the outpost where Mao Tse-tung and a band of Communist revolutionaries hid out for 10 years following the Long March. The plateau in northern Shaanxi province is one of the poorest, driest regions in China.

Showing a visitor around the village recently, Gao and village Mayor Zhang Wenxian, 32, said the land is locked in almost permanent drought. The villagers still climb the mountain several times a year to appeal for rain. A primitive temple, destroyed during the Cultural Revolution (1966-1976) has been rebuilt.

But even remote Zhujiagou has felt the benefits of the economic reforms. Despite the arid terrain, the village has enough ground water to support four wells.

Under the reforms, each of the families was given a plot of land to grow vegetables for itself and to sell during good seasons. Animal husbandry, formerly the domain of the village commune, was also placed in private hands.

One of the biggest beneficiaries was Wang, who parlayed his skill in breeding goats into a modest herd. Now he sells about 20 kids a year, enough to make a decent living for his family. Two daughters are married. A son and daughter-in-law and their children live with him and his wife.

Perhaps an even better example of success is Li Peidong, 29, the private owner of the village’s new coal mine.

According to Gao, the party secretary, villagers had always known there was coal under the hillside. A ribbon of it is visible in the rock formation behind the temple.

But until the economic reforms, no one was interested in digging up the coal since, under the old rules, it would automatically belong to the state.

But under the reforms, Li is able to own the coal, employ several villagers to dig it out and sell it for a profit. Because the mine is on communal property, every villager gets a free supply of energy and a small annual dividend. Li borrowed the equivalent of $7,000 for the winch, dynamite and equipment needed for mining. Today, he is considered the richest man in Zhujiagou village, although he will not say how much he makes.

There are many villages poorer than Zhujiagou on the hardscrabble plateau of north-central China.

But for those who fear alienation of the rural masses in the face of booming coastal prosperity, the village might provide some comfort.

Villagers Are Realistic

The extremely realistic villagers know they have a hard life. They watch the slick TV commercials in amazement, although the ads are less impressive on their black-and-white screens.

Importantly, however, they do not say they feel left out of China’s amazing economic rebirth. Even near the bottom of the economic scale, many people feel they have benefited from the reforms.

“Compared to our own history,” said Gao, “we have made great progress here. Sure, compared to the coastal areas we lag behind. But we have no regrets. Our problems are geographic.

“You can’t expect this area,” he said, pointing to the barren hillsides baking under a blazing summer sun, “to reach the level of the coastal areas yet. We have to wait.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

A Study in Contrasts

China’s coastal and urban areas are much richer than its interior. And the gap continues to widen, presenting a challenge to the huge nation.

Comperative per capita GDP CHINA: $305 Shanghai: $2,352 Wuxi: $1,717 Zhujiagou: $90