Economic Development and Reform Deepening in China

Jiagui Chen

• Editorial: Routledge
• Año: 2016
• ISBN:
  9781317482772
• Edición: 1
• Categoría: Business
• Categoría: Business General

This book, together with Macro-control and Economic Development in China is a collection of papers written in recent years about maintaining economic growth, managing inflation, the relationship between growth and structural adjustment, control of price growth, maintaining stable economic development, and other relevant aspects of macro-control, economic development, and deepening reform. Chinese government adopts many of the recommendations put forward by the book.

Part I

On economic development

1 Advance the progress in the urban and rural integration steadily

1. China’s economic society has entered a new stage of economic development, in which agricultural development is promoted by industry, and rural development is fueled by urban expansion; at the 4th plenary session of the 16th CPC central committee, secretary-general Hu Jintao put forward an important argument of “two tendencies”, stressing that China has generally entered the stage of economic development in which industry nurtures agriculture and cities support countryside

Our studies have indicated that the new stage began with the 10th Five-Year Plan, the bases for which are as follows:

• (1) The pace of industrialization and urbanization in China quickened significantly since the beginning of the 21st century

It is estimated that China’s industrialization entered the second half of the middle period by 2005, with the synthetic index of industrialization level up to 50. Seven provinces and municipalities have already realized industrialization or entered the late stage of industrialization, including Shanghai, Beijing, Tianjin, Jiangsu, Zhejiang, Guangdong, and Shandong; 10 provinces, municipalities, and autonomous regions are at the late stage of industrialization, including Liaoning, Fujian, Shanxi, Jilin, Inner Mongolia, Hubei, Hebei, Heilongjiang, Ningxia, and Chongqing; and 13 provinces and autonomous regions remain at the initial stage of industrialization, including Shaanxi, Qinghai, Hunan, Henan, Xinjiang, Anhui, Jiangxi, Sichuan, Gansu, Yunnan, Guangxi, Hainan, and Guizhou. In the meantime, the pace of urbanization in China has also quickened significantly. By 2005, the urbanization rate in China has reached 42.99%, even up to 50% in nine provinces and municipalities such as Beijing, Tianjin, Liaoning, Jilin, Heilongjiang, Shanghai, Jiangsu, Zhejiang, and Guangdong.

• (2) Financial scale expanding rapidly with increasing financial revenue

The average annual growth rate of China’s financial revenue was 16.49% during the 9th Five-Year Plan (1996–2000), 20.43% during the 10th Five-Year Plan (2001–2005), and 21.81% in the first three years (2006–2008) of the 11th Five-Year Plan. In this period, China’s financial revenue was much higher than the average annual growth rate of 14.2% from 1979 to 2008. What’s more, the scale of China’s financial revenue expanded rapidly with accelerated pace of industrialization; the financial revenue exceeded RMB1 trillion in 50 years (1.1444 trillion in 1999), further increased to RMB2 trillion in four years, to RMB 3 trillion in two years, to RMB5 trillion in two years only, to RMB 6 trillion in one year, and is expected to draw near or exceed RMB10 trillion this year.

• (3) Rapidly increasing financial funds for agriculture and expanding financial scale

The Central Government has begun to make large-scale investment and all-round compensation for “three rural issues” (concerning agriculture, farmers, and rural areas), e.g. direct grain-growing subsidy, selective seed subsidy, agricultural implements purchase subsidy, and general subsidies for purchasing agricultural supplies for all farmers, as well as additional investment into the construction of rural infrastructure and social undertakings. According to data from the Ministry of Finance, the absolute amount of the financial fund for agriculture increased rapidly since the year of 2000, i.e. only RMB123.154 billion in 2000 and nearly doubled to RMB245.031 billion in 2005. During the 10th Five-Year Plan, the growth rate of funds for agriculture averaged out at 14.9%, 1.6 percentage points faster than the 9th Five-Year Plan. The financial funds for agriculture amounted to RMB351.7 billion in 2006, up to RMB431.8 billion and 595.55 billion respectively in 2007 and 2008, to RMB725.31 billion in 2009, and further up to RMB2104.36 billion in the first four years of the 11th Five-Year Plan, outnumbering the total sum of previous 50 years.

• (4) Agricultural taxes abolished throughout the country

In the 21st century, as the pace of industrialization quickens, China is turning from an agricultural country into an industrial one and the financial revenue of the Central Government is now dependent largely on industry and modern services. Of three industries, agriculture makes up a decreasing proportion in financial revenue, and the proportion of agricultural taxes in total government revenue dropped from nearly 40% in 1950 to about 3% in 2000. This indicates that abolition of agricultural taxes throughout the country has little impact on financial revenue. On this ground, agricultural taxes, including a tax on agricultural specialty products except tobacco, were cancelled in 2006 to alleviate farmers’ burden amounting to about RMB50 billion, from which more than 700 million farmers have benefited. This marks the end of the history when farmers were obliged to contribute grain to the imperial palace and pay mandatory taxes, which has lasted more than 2600 years.

• (5) The proposal of “building a new socialist countryside” conception quickened the infrastructure construction and development of social and cultural undertakings in rural areas. In October 2005, the CPC Central Committee presented the Proposal for the 11th Five-Year Plan, specifying the objectives and tasks of building a new socialist countryside. Afterwards, the Political Bureau of the Central Committee and the State Council conducted monographic studies on this subject. It was emphasized in a series of documents and policy measures issued by the Central Committee that we would by all means increase investment in “three rural issues”, alleviate burden on farms, increase farmers’ income, and build a new socialist countryside with “well-developed production, well-off life, civilized rural customs, clean and tidy villages, and democratic administration”.

The aforesaid facts have proven that China’s economic society has generally entered a new stage at which agriculture is nurtured by industry, and the countryside is supported by cities. In this case, the CPC Central Committee and the State Council proposed in time that the urban construction be integrated with rural construction and overall consideration be given to both urban and rural development. However, it is also clear that conditions for the construction of urban-rural integration vary from one region to another due to the disparate development of China’s economic society. For regions that have entered the late period of industrialization or have realized industrialization and whose urbanization rate has measured up to 50%, the conditions therein have become mature for the construction of urban-rural integration, so they are required to focus on upgrading the industrial structure and the acceleration of such integration. For regions that remain in the initial or middle period of industrialization and whose urbanization rate remains below 40%, they are required to quicken the space of industrialization and urbanization and carry out a pilot project of urban-rural integration in selected cities where conditions permit, and promote overall urban-rural integration later on when conditions become mature.

2. Several key issues that must be addressed during the construction of urban-rural integration

In the last two years, some authority ratified some regions to carry out pilot projects with regard to the construction of urban-rural integration; all provinces, municipalities, and autonomous regions made efforts in this regard; many experts and scholars conducted in-depth discussions on this issue. Practice and theoretical research have already proven that breakthroughs must be made in the following key issues, apart from a rather advanced level of industrialization and urbanization, in order to achieve fruitful results of urban-rural integration activities:

• (1) Equalization of public finance

It is affirmative that the State has increased investment in the “three rural issues (rural economy, rural development, rural demography)” in recent years, but the investment is insufficient as compared with investment in urban development. Besides, the growth rate of investment in rural areas remains lower than the growth rate of public finance, despite an increasing absolute amount of investment into “three rural issues”. In addition, the national investment put in agricultural infrastructure is inadequate to ensure good maintenance of many water conservancy facilities in bad repair and smooth progression of rural social undertakings, especially the rural social security, thus leading to a big difference in urban-rural income gap and living environment.

• (2) Reform of household registry system

This is a big trouble that has the hindered construction of urban-rural integration for a long period. More than 100 million rural migrant workers are perplexed by the problem of citizen identity when they are working in cities; rural college graduates, whether employed or unemployed in cities, do not feel at home when their household registers are sent back to their hometown in rural areas because they fail to find an employer who can help them settle in. The rural household registry, rigidly separated from urban household registry, has discriminated against rural residents in terms of education, employment, and wages/benefits. The Central Government has put forth some requirements stressing the reform of the household registry, but it is not easy to push forward the reform only through efforts of several sectors and local authorities; rather, a comprehensive supplementary reform must be implemented under unified deployment.

• (3) Reform of land system

While rural land is owned by the collective as prescribed by law and is contracted to farmers for long-standing cultivation and management, it is difficult to implement the ownership and management rights of rural land in practice. Quite a few local governments infringed upon farmers’ interests by the low-cost requisition of rural land and reselling to land developers, thus earning a large amount of land fund, much of which was spent on the construction of large-and medium-sized cities. In the past, local governments implemented urban construction with money accumulated by price scissors, but nowadays they achieve this purpose by the requisition of rural land. During land transfer, many problems have occurred, such as poor scale benefits and low labor productivity. According to data from the National Bureau of Statistics, the labor force population employed in rural areas accounted for above 38% of total employment in 2009, but the primary industry made up only 10.3% of the GDP.

• (4) Complete coverage of urban and rural social security

Since the reform and opening up, the new rural social security system has not been established after the disintegration of the old system in China. In recent years, the Central Government has placed great emphasis on the construction of a new rural social security by trial implementation of “new rural endowment insurance system” in some regions; nevertheless, the system has a relatively narrow coverage and low security level, and the investment made in the rural security system by the Central Government remains at a low rate. A huge number of rural workers are employed in cities, but few of them are insured; for those insured, their endowment insurance relations cannot be transferred or renewed.

• (5) Formation of a uniform market for urban and rural labor force

Due to restrictions on household registry, the labor market in China is in fact split into an urban labor market and a rural labor market, resulting in an unreasonable employment structure. In 2008, China’s three industries presented a production value structure of 11.3:48.6:40.1, while the employment structure was 40.0:26.8:32.4. In developed countries, however, the production value structure and employment structure changed synchronously and coordinated generally with each other. As a result of the household registry barrier and split labor market, rural workers make up an overwhelming majority of blue-collar staff in many industries, a unique case around the globe; what’s more, they are not treated in the same way as urban workers.

• (6) Quickening construction of medium-and small-sized towns

As the pace of industrialization and urbanization quickens in China, there will be a great amount of the rural population migrating into cities.

Due to limited bearing capacity in large-and medium-sized cities and small towns, a majority of rural migrant workers have aggregated in medium-and small-sized cities and small towns that attract insufficient investment from the Central Government and receive the poor effect of industrial agglomeration. Therefore, it will be less likely to help rural migrant workers settle in large-and medium-sized cities and small towns unless the industrial development and living environment are improved.

(Published in Chinese Academy of Social Sciences Brief Report for Leaders’ Reference, Oct 25, 2010)

2 The process of industrialization and the change of the financial revenue and expenditure structure

The process of industrialization has changed the situation where state revenue relied largely on agriculture and traditionally commerc...