China's Rural Areas

Building a Moderately Prosperous Society

China Development Research Foundation

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351784832
• Edition: 1
• Topic: Sciences sociales
• Subtopic: Études régionales

The prosperity of China's people has advanced very much in recent decades. However, in many respects China is still a developing country, and this is especially true of rural areas where economic progress has not been as marked as in urban areas and where many people still live in relative poverty. The Chinese government recognizes that more hard work is needed in order to improve prosperity in the countryside. This book provides a systematic and comprehensive analysis of the situation in China's rural areas, assesses the effectiveness or otherwise of current policies, and puts forward proposals for further development. Subjects covered include the changing population profile of rural areas, land ownership, agricultural improvements, and local self-government.

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The epic task of “building a moderately prosperous society in an all-round way” in rural parts of China

• The atypical dichotomy between urban and rural areas and how this pattern developed in China
• Rural development strategy in China from a historical perspective
• Key tasks and challenges as we seek to establish all-round moderate prosperity in rural areas
• The basic pathway toward building an all-round moderately prosperous society in rural areas

“Building a moderately prosperous society in an all-round way in China’s rural areas” is a task of epic proportions and historic significance. It is also the most challenging link in China’s overall strategy. Remarkable progress has been made in rural development and in rural people’s living standards since the start of reform and opening up, but despite such progress there is still a long way to go in achieving the requirements of “moderate prosperity.” China’s rural situation contains many obvious “short staves in the bucket” (limiting factors) when it comes to eradicating poverty, improving health, education, and culture, ensuring security, providing for social governance, and protecting resources and the environment. Some 60 percent of China’s total population is expected to be urbanized by the year 2020, but that still leaves 40 percent, roughly 500 million people, who live in rural areas. Without including them in moderate prosperity, China will not achieve its goal of nationwide moderate prosperity in an inclusive sense. That is true whether the results are measured in terms of the total number of rural people, or their percentage of the population, or in terms of the interdependency of China’s urban and rural areas.

Reaching the grand goal of a moderately prosperous society in an all-round way by the year 2020 will require evaluating the situation in terms of an overarching framework that incorporates a unified approach to urban and rural development. It will require going further in defining strategic priorities for rural reform and development. It will require mobilizing the resources and personnel to accomplish those priorities, as well as refining and being more creative in coming up with policies and measures that promote rural development. In December of 2013, President Xi Jinping spoke to the Central Rural Work Conference and emphasized a more pro-active and long-term approach to the issues at hand. He said that if China is to be strong, its agriculture needs to be strong. If it is to be beautiful, its countryside must be beautiful, and if it is to be prosperous, its rural residents must be prosperous.

Any progress in achieving moderate prosperity in the countryside needs to be evaluated and understood from two different perspectives, which could be defined as horizontal and vertical. The horizontal perspective examines the relationship between China’s urban and rural areas and takes into account the realities of how their differences came about. The vertical perspective examines rural development strategies and their evolution since the founding of the People’s Republic of China but particularly since the start of reform and opening up. This chapter serves as a prologue to the analysis and discussions in subsequent chapters by reviewing the relationship between urban and rural development in China and the evolution of changing strategies. On the basis of that review, it points out the tasks and the challenges facing rural areas as the country seeks to accomplish this historic goal.

1. The atypical dichotomy between urban and rural areas and how this pattern developed in China

One of the fundamental topics in development economics concerns the issue of how a country can transition from a dual economic structure to a unified economic structure. According to the classical theory of development economics, countries at a stage of economic takeoff suffer from a severe surplus of agricultural labor, from a dual economic structure as defined in terms of urban and rural, and from radically unequal incomes and levels of economic and social development in urban and rural areas. As the economy develops, particularly through a process of modern industrialization and urbanization, the rural labor force shifts toward the industrial sector as the rural population migrates into cities. The result is a constant decrease in the rural population and a decrease in the amount of surplus agricultural labor. At the same time, the disparity in productivity between agricultural and industrial sectors declines, as well as the disparity in wages and incomes between urban and rural inhabitants. As the process continues and the economy develops, the surplus of agricultural labor disappears, together with the development gap between urban and rural. A more unified economic structure begins to develop. This process has been described most particularly by the Lewis dual-economy model, which posits a disappearance of surplus agricultural labor at a point that has come to be called a Lewisian turning point. The classical theory of development economics has focused primarily on economic issues prior to the Lewisian turning point, however. Economic development after that point has received less attention. The reason is that classical theory makes the assumption that an economy will embark on sound growth once the dual-economic pattern has become unified. The disparity between cities and countryside will disappear, markets will allocate resources effectively between urban and rural areas and between agricultural and industrial sectors, production factors will flow freely between urban and rural areas, and urban and rural economies and social structures will mutually interact in ways that promote common development.

The actual situation in China is, however, quite different from these assumptions. First, prior to the Lewisian turning point, China’s disparity between urban and rural areas has been monumental and has far surpassed that of most other developing countries on earth. ¹ The reason is that China adhered to policies and a governing system that intentionally blocked off the countryside from cities. The household registration system was the primary means by which the rural population and any mobility of the labor force was controlled. There were, therefore, no market mechanisms that could enable resource allocation between urban and rural areas. At the same time, the government’s development strategies focused on industry, while slighting agriculture. They placed the priority on urban development and not on rural development. Moreover, even after China reached a Lewisian turning point, the gap between social and economic development in urban and rural areas and between urban and rural incomes remained high. Finally, institutional obstacles to any unification of urban and rural development in China remain firmly in place. Such things as employment opportunities, wages and salaries, social security provisions, public services, and so on remain highly unequal. Rural residents are in an unfavorable position when it comes to development opportunities. Given this situation, it is hard for the kind of sound economic development and unified urban–rural structure that classical development theory posits to make its appearance. If the government does not modify its traditional development strategy, if it continues to place its priorities on cities and industry while slighting agriculture and rural areas, the “divided up” urban–rural dichotomy in China will simply continue.

International experience has shown that, as a country passes through a Lewisian turning point, it also transitions from being a low-income to a middle-income country. It then embarks on the path to becoming a high-income country. International experience also indicates, however, that few countries can smoothly transition to becoming high-income countries, since most fall into what is known as the middle-income trap. Research indicates that many factors may lead a country into this trap, but one factor that all countries in the trap have in common is a wide disparity in incomes (Rozelle, 2012). Over the past thirty years, China’s income disparity has notably increased (Li Shi et al., 2013; Li and Sicular, 2014). A major structural factor leading to increased income disparities overall relates to excessive income disparities between urban and rural areas (Li Shi and Luo Chuliang, 2007; Sicular et al., 2007). It will take years before China becomes a high-income country. Among the challenges facing the country in the interim, one of the most important is achieving social fairness while sustaining economic development. Meanwhile, one of the least fair aspects of China’s situation, specifically, is the inequality in development opportunities between urban and rural areas. Realizing moderate prosperity in an all-round way in rural areas is therefore a prerequisite for realizing China’s social fairness objectives. It also is the necessary policy option if China is to avoid falling into the middle-income trap.

In terms of national considerations, food security is also at stake in this equation. If there is a massive disparity between urban and rural areas and agricultural productivity does not increase once a country reaches a Lewisian turning point, the ongoing shift of agricultural labor to nonagricultural industries will negatively impact agricultural production. This will affect food security. China is just on the verge of entering a post-Lewisian turning point era. China’s agriculture will soon be facing not just a shortage of agricultural labor but the severe challenge of radically inadequate labor. It has therefore become imperative to pick up the pace of modernizing agriculture, reforming the “land system,” and improving agricultural productivity as a part of creating a moderately prosperous society in rural areas.

2. Rural development strategy in China from a historical perspective

Starting in 1958, the household registration system, among a number of other institutional arrangements, intensified the separation of urban and rural areas in China. In addition, there are tremendous differences between the countryside and cities that fall outside just the dual-economic system and that exacerbate and solidify the formation of a dichotomy in the country. These relate to property rights, the supply of public services, the tax revenue system, and forms of governance.

This situation has been changing since the start of reform and opening up. As the dual economic structure has changed, systems that relate to other aspects of the urban-rural dichotomy have also evolved. These changes can be roughly divided into the following four periods.

1978–1992: Invigorating the rural economy

The countryside is the area that led the way in breaking through the constraints of the planned-economy system in China. This was achieved through what was known as the rural household contract responsibility system. Ownership or property rights to land continued to be held by the collective, but collective economic entities allocated operating rights over that land to individual households. They were allowed to farm these independently. The unified national system by which agricultural goods were purchased also underwent reform as controls were lifted and markets for such goods began to open up. Meanwhile, town-and-village enterprises were also allowed to operate as a supplement to State-Owned Enterprises and became an important component of the national economy as their “status” was confirmed. This propelled the strong growth of such enterprises to the extent that they were generating one-fifth of industrial production in China by 1988, despite the lack of any funding from the State budget or loans from State-owned banks. In addition, restrictions on human movements were relaxed, which spurred greater mobility of the rural population and led to greater concentrations in towns and cities. It can be said that rural areas in China made a major contribution to the country’s overall reform by generating a dynamic market-economy force that drove economic growth. “Incremental reform” enabled the growth of a market economy that sprouted outside the bounds of the existing economy. Green light policies allowed the countryside to lead the way in economic growth with a minimum of inputs from public finance. This then became the major feature of government policy in terms of adjusting urban–rural relations during this period in China.

1993–2002: Efforts to stabilize the relationship between urban and rural areas

The reform orientation of China’s policies was confirmed in 1993, via a Decision adopted by the Third Plenary Session of the 14th CPC Central Committee. This was called the “Decision on Various Issues Relating to Establishing a Socialist Market Economy as Determined by the Central Committee of the Communist Party of China. This marked the policy determination to set up a socialist market-economy structure in the country. During this period, a number of initiatives were beneficial to pushing forward rural economic development and improving rural incomes, including such things as eliminating the requirement to sell a set amount of grain to the government at the minimum price, allowing greater mobility of rural people, and encouraging the growth of town-and-village enterprises. At the same time, however, the State became unable to provide more financial support to rural areas due to several factors. These included the way reform in urban areas entered an important phase of fiscal and tax reform, exchange-rate reform, and State-Owned Enterprise reform. They included the need to hold down inflation within the country and the need to deal with the Asian financial crisis outside the country. As a result, not only were rural reforms left in abeyance, but preferential tax treatment of town-and-village enterprises was eliminated, mobility of rural migrant workers was subjected to demands for greater “order,” and various restrictions were reimposed. One of the most critical issues became the extremely tense relationship between local cadres and the masses of rural people. The fixed quotas for grain requisition had been eliminated, but rural residents were now required to hand over an agricultural tax and “two levels” of fees as charged by township- and village-level governments as a way to fund all public goods at the rural level. Such goods included education, as well as grassroots-level governance by local officials. ² In addition to onerous fees and taxes, rural residents were now subjected to more stringent enforcement of family planning policies. During this period, the central government felt called upon to issue documents to “lessen the load on farmers” nearly every year, which had essentially no effect.

2003–2012: Urban areas start “paying back” to the countryside

China’s economy grew rapidly as the country entered the World Trade Organization and as urban reforms were rolled out successfully. This gave the government significantly more leeway to support rural areas. At the same time, the stymied development of the countryside and the growing gap between urban and rural served as a brake on urban development, as well as on the country overall. Based on these changes, the government carried out substantive modifications to its “three agricultures” policies [farmers, farming, and the rural economy]. With respect to rural migrant workers, it shifted from an emphasis on “orderly migration” to “protecting migrant workers.” With respect to agriculture, it first carried out regional pilot projects and then ultimately, in 2005, completely eliminated the agricultural tax and the various fees that had been added onto that tax. Instead, agricultural production began to receive direct subsidies from the government. In education, the various fees that had been charged for the nine-year compulsory education program and for textbooks were exempted, and subsidies were extended to students in need (known as the “two exemptions and one subsidy policy”). A cooperative medical system and a subsistence allowance system were set up, and a pension system began to be introduced. New standards were adopted for assistance to impoverished regions, and the country began implementing a new poverty alleviation program. A plan to improve the nutrition of impoverished students in the nine-year compulsory education program began to be implemented. These government-funded policies and measures, aimed at improving rural welfare systems, brought increased public spending to rural areas and very tangible benefits to people. They played an important role in preventing the urban–rural disparity from widening even further. They moderated the conflicts between grassroots administrators and local people and helped stabilize social order in rural areas. Meanwhile, a whole series of agricultural support policies also led to year-on-year annual increases in grain production and helped stabilize the supply of agricultural goods.

Post-2013: Unifying the approach to urban and rural development and building a moderately prosperous society in an all-round way

The critical element in setting up a moderately prosperous society in an all-round way involves a coordinated or overall approach to urban and rural development. The 18th National Party Congress explicitly pointed out that unifying urban and rural development was the fundamental solution to issues involving farmers, farming, and the rural economy. Several hundred million people live in China’s vast rural areas; this means that they are the deciding factor in whether or not the country can achieve moderate prosperity for all. In addition, however, China’s urban and rural economies are already tightly bound to one another. The importance of rural development therefore takes on major significance since cities can no longer develop in isolation.

First, cities are relying ever more heavily on rural areas for agricultural products. In 2013, China’s urbanization rate exceeded 53 percent, and its national income reached the level of upper-middle-income countries. The situation with respect to demand for agricultural goods is very different from a time when farmers were in the majority in the country and the purchasing power of urban residents was limited. In terms of diversity, quantity, and quality, the new forms of demand highlight the importance of agricultural production, especially grain production, to cities. If agriculture cannot modernize sufficiently to ensure that it meets the demands of the majority of China’s population who live in cities, this will threaten the social stability of China’s cities.

Second, cities in China increasingly rely on a labor force that is made up of young people from the countryside. As urbanization proceeds in China, cities will continue to depend on this supplemental labor force given economic development and the aging of the population. Some 60 percent of students enrolled in the nine-year compulsory-education stage of schooling are in grade schools and middle schools in rural areas. Their early childhood care and preschool development are inadequate, and their levels of nutrition and education are far below those of urban children. This is going to have a serious impact on the caliber of China’s urban labor force in the future. Undernourished and undereducated children will not be able to achieve higher levels of attainment and skills. This is eventually going to hold back China’s industrial upgrading and its economic restructuring.

Third, urban and rural areas rely on each other in terms of their ecological environment. Rural areas have been the victims of industrial pollution, but they also have generated rural forms of pollution through overuse of chemical fertilizers and pesticides and the lack of effective systems to dispose of all kinds of garbage and domestic waste. Single-source pollution, as well as area-wide pollution, has been the result. Not only do efforts need to be made in environmental and ecological remediation, but local people in rural areas need to participate in and support these efforts, whether they are replanting trees, managing field improvements, restoring polluted water systems and degraded soils, or addressing the most outstanding of environmental problems.

Finally, due to the mobility of China’s p...