The Strategy of Chinese Rural-Urban Coordinated Development to 2020 (Part 1) [1 ed.] 9789814298834, 9789814298827

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Enrich Series on China’s Economic Issues This series emphasizes the employment of modern economics methods to explore

and research hot-spot issues and difficulties in the reform, opening-up and economic development facing China today. It covers a wide variety of economic

issues ranging from monetary policy, fiscal policy, regional economy to industrial and banking development.

Vol. 6

Research on the West Triangle Economic Zone: Development of the Antigradient Region

Vol. 7

Conflict and Harmony: Development in the Yangtze River Delta

Vol. 8 The Strategy of Chinese Rural-Urban Coordinated Development to 2020 Part 1 Vol. 9

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The Strategy of Chinese Rural-Urban Coordinated Development to 2020 Part 2

12年12月18日 下午12:05

Sun Jiuwen et al.

Singapore • Hong Kong • Beijing • Honolulu

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Published by Enrich Professional Publishing (S) Private Limited 16L, Enterprise Road, Singapore 627660 Website: www.enrichprofessional.com A Member of Enrich Culture Group Limited Hong Kong Head Office: 2/F, Rays Industrial Building, 71 Hung To Road, Kwun Tong, Kowloon, Hong Kong, China China Office: Rm 1800, Building C, Central Valley, 16 Hai Dian Zhong Jie, Haidian District, Beijing, China United States Office: PO Box 30812, Honolulu, HI 96820, USA English edition © 2013 by Enrich Professional Publishing (S) Private Limited Chinese original edition © 2010 China Renmin University Press Translated by Cui Zengbo and Wang Jinhui Edited by Glenn Griffith and Phoebe Poon All rights reserved. This book, or parts thereof, may not be reproduced in any form or by any means, electronic or mechanical, including photocopying, recording or any information storage and retrieval system now known or to be invented, without written permission from the Publisher. ISBN (Hardback) 978-981-4298-82-7 ISBN (ebook) 978-981-4298-83-4 (pdf) 978-981-4298-84-1 (epub) This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Enrich Professional Publishing is an independent globally-minded publisher focusing on the economic and financial developments that have revolutionized new China. We aim to serve the needs of advanced degree students, researchers, and business professionals who are looking for authoritative, accurate, and engaging information on China. Printed in Hong Kong with woodfree paper from Japan

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Contents Preface to the Series ................................................................................................. vii Abbreviations ........................................................................................................... ix

Chapter 1 Rural and Urban Development in China: Process, .................... 1

Problems, and Future Choices

Chapter 2 Comprehensive Evaluation of the Levels of Rural-Urban . ....... 35

Coordinated Development

Chapter 3 The Socioeconomic Causes of Rural-Urban .................................

63

Chapter 4 The Strategic Conception of Rural-Urban ....................................

99



Uncoordinated Development



Coordinated Development

Chapter 5 The Coordination of Rural-Urban Income Levels . ..................... 143 Chapter 6 The Comprehensive Reform of Rural-Urban Coordinated ....... 175



Development and the Improvement of the Rural-Urban “Repayment” Land System

Chapter 7 Solutions to Problems Related to Rural-Urban Migration . ....... 205 Chapter 8 Solutions to Problems Related to Rural Industrialization ......... 237

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and Industry Development

Notes

.............................................................................................................

279

References .............................................................................................................

285

Index

293

.............................................................................................................

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Preface to the Series The development of economic theory is closely associated with economic practice. With the transition of China to a Socialist market economic system, practice requires the development and prosperity of economics; at the same time, practice is creating the conditions for the development of economics. Market-oriented reform in China is unprecedented and no ready-made economic theory can be used for guidance. This is a major challenge for Chinese scholars. “By other’s faults, wise men correct their own.” With the translation and introduction of a large quantity of Western economic theories to China and the growth of many skills in modern economics attainment, brand-new tools and perspectives are available for the understanding and solving of the economic problems of China. Theory and practice are interactive. While using modern economic theory as reference, China, as an unparalleled “test field,” will certainly inject new vitality into the development of economic theory and become an important driving force for its development. Only in this way may economics based on research on Chinese economic problems be established. It is against this backdrop that Chinese economic issues are endowed with special significance. The fundamental purpose of planning for and publishing the Series on Economic Issues in China is to encourage economists’ spirit of innovation and exploration, further promoting the development and prosperity of economics research in China, and to establish a platform that is suitable for the growth of new ideas among economics works in China, providing a theoretical economic circle on China and explorers in real sectors a space for presentation of high-level research findings, thus enabling this series to be indispensable reading for readers at home and abroad to learn about the development of economics and the economy in China. The distinctness and urgency of economic issues in China will provide Chinese scholars with a broad space for development. Using economic issues in China as the breakthrough point, this series emphasizes the employment of modern economics methods to explore and research hot-spot issues and difficulties in the reform and opening-up and economic development of China. For the purpose of development of the Chinese economy and economics, on an academic basis, this series has employed a “double-blind review system” integrated with solicited manuscripts from experts so as to cultivate a number of Chinese academic pioneers with the spirit of rationality and exploration in the field of economics. China is an ideal country for economic research, where the diligent may make plentiful and substantial achievements.

vii

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Abbreviations CCCPC

Central Committee of the Communist Party of China

PRC

People’s Republic of China

CPC SEZ

TVE

Communist Party of China Special Economic Zone

Township and Village Enterprise

ix

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Chapter Rural and Urban Development in China: Process, Problems, and Future Choices

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Before the foundation of the People’s Republic of China (PRC), the economy of China’s rural and urban areas was in a closed state, and for a long time after the establishment of the new state, the government implemented a policy of planned economy, which continued to repress economic development in rural and urban areas. It was the Third Plenary Session of the 11th Central Committee of the Communist Party of China (CCCPC) in 1978, which adopted the policy of reform and opening up, that ushered in a new era of economic development in rural and urban China.

The Hisotry of Rural and Urban Development Before its reform and opening up, the economy of rural and urban China had long remained in a closed state. During the New Democratic Revolution, the &KLQHVH &RPPXQLVWV KHDGHG E\ 0DR =HGRQJ GHÀQHG WKH HVVHQWLDO SUREOHPV of Chinese society in a way that combined the ideas of the Chinese revolution and land reform. After the foundation of New China, the Communist Party of China (CPC) continued to push through national land reform. In June 1950, the &HQWUDO3HRSOH·V*RYHUQPHQWRIÀFLDOO\SURPXOJDWHGWKHLand Reform Law, which explicated the objectives of the land reform: to abolish the land ownership system based on the feudal exploitation of the landlord class, and to implement a peasants’ land ownership system for the purpose of emancipating rural productive forces, blazing a way for the industrialization of New China. Starting from 1950, land reforms were carried out in three stages in the eastern, south central, southwestern, northwestern, and other newly liberated regions of China under the guidance of the Land Reform Law. By the end of 1952 and the beginning of 1953, the historically largest land reform was completed successfully in all parts of China except for Tibet and other regions of ethnic minorities. The policy of “land-to-the-tiller” was realized.1 The Sixth Plenary Session of the Seventh CCCPC in October 1955 adopted the Decisions on Agricultural Cooperation which demanded the acceleration of agricultural cooperation. Prompted by political mobilization and critiques, agricultural cooperation soon took off. Within several months, “primary cooperation” was completed nationwide, followed by “advanced cooperation” in the next few. The Great Leap Forward Movement of Agriculture launched in 1958, along with the introduction of the people’s communes in rural areas, brought great havoc to the national economy. The establishment of the three-level ownership framework of the people’s communes, namely, the people’s commune, the production brigade, and the production team, with the latter being the basis, and the large and collective nature of these communes only depressed peasants’

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enthusiasm in production. In fact, during the People’s Commune Movement, the practice of contracting production quotas to each household, as a single-handed GHFLVLRQ ZDV VHYHUHO\ FULWLFL]HG DQG ÀQDOO\ VXEPHUJHG +RZHYHU LW KDV QHYHU been completely withdrawn in rural areas. The Third Plenary Session of the 11th CCCPC in 1978 marked a great turning point in the history of the CPC and the PRC since its foundation. The most striking event in the new era was the policy of reform and opening up, which was embarked in rural areas. The development of urban and rural China since its reform and RSHQLQJXSFDQEHDQDO\]HGLQÀYHVWDJHV

Phase I (1978–1984): The launch of rural reform and the resumption of urban development During this period, the implementation of the household contract responsibility system greatly mobilized peasants’ enthusiasm for production, thus rapidly improving agricultural productivity. Under the direction of “emancipating the mind, relaxing policy controls, and promoting rural reform,” the No. 1 Document issued by the central government at the beginning of each year from 1982 to 1986 all focused on rural issues, outlining the policy and directions of rural reform. On January 1, 1982, the Central Committee of the CPC issued the momentous No.1 Document with regard to the Three Rural Issues, which addressed issues related to agriculture, rural areas, and peasants in China. In the Document, the party provided a summary of the rural reform, proclaimed further relaxation of the rural policy, and acknowledged two forms of household contracts: contracting production quotas or pieces of work to each household. In January 1983, the second No. 1 Document titled Some Questions Concerning the Current Rural Economic Policy, ZKLFKDIÀUPHGWKHKRXVHKROGFRQWUDFWUHVSRQVLELOLW\V\VWHPDV´DJUHDWLQYHQWLRQ for Chinese farmers under the leadership of the CPC and a new development on Marxist Theory on Agricultural Cooperation in accordance with China’s practical situation” and called for the full implementation of the system, was formally promulgated. On January 1, 1984, the third No. 1 Document was issued with the title Circular on Rural Work during 1984, stressing that China should continue to consolidate and improve the household contract responsibility system with remuneration linked to output, extending the land contract period to more than 15 years. This policy put peasants’ minds at ease for the long term. From the perspective of the development of and relationship between rural and urban areas, the rural institutional reform has demonstrated a profound impact on WKHSURFHVVRIXUEDQL]DWLRQZKLFKLVUHÁHFWHGLQWKUHHPDMRUDVSHFWV

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First, it started off the population movement between rural and urban areas. After the implementation of the land contract system in rural areas, about 20 million educated urban youths, cadres, and technicians who had been settled in rural areas returned to urban areas for employment, which had the effect of restoring urban population growth. Second, commercial interactions between rural and urban areas began to take shape. The lifting of the ban on urban-rural trade strengthened the exchange of resources and personnel between rural and urban areas, enabling a large number of business-minded rural residents to become temporary urban residents. Third, the development of Township and Village Enterprises (TVEs) propelled the development of some designated towns. Encouraged by government policies, peasants grouped TVEs together for the establishment of their own towns. Bringing along their own rationed food, they adhered to the principle of “leaving the farmland but not the hometown and getting into the factory but not the city,” which marked the beginning of the in-situ urbanization of rural areas. A classic example can be found in Longgang Town, Wenzhou, Zhejiang Province, a municipal town IRUPHGLQVXFKDZD\DQGWKXVNQRZQDV´WKHÀUVWSHDVDQWV·WRZQRI&KLQDµ

Phase II (1985–1991): The deepening of rural reform and steady urban development In January 1985, the Central Committee of the CPC and the State Council issued the fourth Document No.1, titled Ten Policies for Further Invigorating the Rural Economy, of which the major objectives were to adjust the industrial structure in rural areas, abolish the system of monopolized and prescribed purchase of farm produce that had been in force for 30 years, and implement a new policy of planned and contracted purchase of a few important agricultural products such as grain and cotton. In addition, the government changed agricultural tax from tax-in-kind into cash tax. A year later, Plans for Rural Work during 1986WKHÀIWK'RFXPHQW1R IXUWKHUVWUDLJKWHQHGWKHVWDWXVRIDJULFXOWXUHLQWKHQDWLRQDOHFRQRP\,WFRQÀUPHG the principle of relying on both policies and science while emphasizing the increase of investment for rural reform.2 Alongside the continuous promotion of rural institutional reform, the reform of China’s economic system began to shift from the rural to the urban. Thus, urbanization became the driving mechanism of the institutional reform. Following the change in China’s economic structure at the beginning of its reform and opening up, labor-intensive light industries, which suited the nation’s stage of development and conditions, experienced rapid development in both rural and urban areas.

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With the success of rural reform and the smooth progress of pilot reforms in urban areas, the reform of the urban economic system launched at the start of the seventh Five-Year Plan took center stage in the reform of the entire economic system. Its emphases included the gradual extension of enterprises and local governments’ DXWRQRP\ LQ ÀQDQFLDO SODQQLQJ SURGXFWLRQ DQG PDQDJHPHQW WKH RSHQLQJ DQG H[SDQVLRQRIYDULRXVPDUNHWVWKHJUDGXDOHVWDEOLVKPHQWRIWKHPDUNHWPHFKDQLVP DQG WKH LQYLWDWLRQ RI IRUHLJQ LQYHVWPHQW IRU FDSLWDO GLYHUVLÀFDWLRQ 'XULQJ WKLV SHULRGXUEDQGHYHORSPHQWEHJDQWRWUHQGWRZDUGGLYHUVLÀFDWLRQDVLWGHSHQGHG much less on government investment. Existing tertiary industries in urban areas developed drastically, and a number of towns that were thriving with trade, tourism, and cultural attractions emerged. In terms of spatial development, the growth of new cities and blooming of small towns showed a trend of extensive expansion. The further development of TVEs greatly enhanced urbanization from the bottom up, leading to the proliferation of new small towns and steady economic growth. In effect, the rapid development of labor-intensive light industries and TVEs constituted the major driving force of urbanization. On another level, a number of small towns with fair geographical locations and great developmental potential evolved into small cities. It should DOVREHQRWHGWKDWZLWKWKHUHOD[HGFRQWURORIWKHÁRDWLQJSRSXODWLRQODUJHVFDOH cross-regional movements of surplus rural labor to urban areas from places with a large proportion of agrarian population, where non-agricultural industries failed to provide adequate employment opportunities, exerted a huge impact on urban development.

Phase III (1992–1997): Full-fledged urbanization and the slowdown of rural development Following the speech by Deng Xiaoping during his tour in South China in 1992, the growth rate of agriculture increased for four successive years. The household FRQWUDFW UHVSRQVLELOLW\ V\VWHP ZDV RIÀFLDOO\ LQFRUSRUDWHG LQWR WKH &KLQHVH constitution in 1993, becoming the basis of China’s economic system. In the same year, the State Council decided to extend the contract period of rural farmland from the original 15 years to 30 years. In 1996 and 1997, the growth rate of agriculture was on the downward slope, and the retardation of agricultural development appeared even more obvious when compared to non-agricultural industries. Regarding rural reform and development, the household contract responsibility system demonstrated marked vitality and adaptability, giving birth to various forms of agricultural industrialization that met the demand of the scale of modern

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agriculture. The establishment of the basic system of operation that ensured the stability of the household contract responsibility system enjoyed wide support. At the same time, to adapt to intensifying market competition and macroeconomic adjustments, the development of rural non-agricultural industries entered into a new stage, embracing product adaptation, corporate restructuring, and the circulation of property rights. During the period of 1992 to 1997, urbanization took the shape of perfecting WKH H[LVWLQJ XUEDQ HVWDEOLVKPHQWV DQG VHUYLFHV 6SHFLÀFDOO\ WKLV UHIHUV WR WKH construction of development zones, the reconstruction of old towns, and the boom of international metropolises. In this stage, the Chinese economy experienced a new round of rapid growth, and enthusiasm for the economic construction was felt in every part of China. In particular, the construction of coastal development zones and enterprises engaged in the “three foreign” (processing of foreign raw materials, processing according to designs supplied by foreign clients, and assembling parts supplied by foreign clients) and compensation trade attracted a large number of migrant workers. This round of economic growth was directed with the intention of catching up with the so-called “Four Little Tigers” of Southeast Asia (Singapore, +RQJ .RQJ 7DLZDQ DQG 6RXWK .RUHD  DQG DFKLHYLQJ WKH JRDO RI ´PRGHUDWHO\ SURVSHURXVVRFLHW\µ+DYLQJVROYHGWKHEDVLFSUREOHPVRIIRRGDQGFORWKLQJWKH production of houses, automobiles, and other value-adding products alongside WKHLU VXSSRUWLQJ LQIUDVWUXFWXUH ZHUH LGHQWLÀHG DV WKH GULYLQJ IRUFH RI HFRQRPLF development. To arrest the over-rapid development of new cities and disperse urban construction brought down from the previous phase, the policy of moderate and concentrated urban development was introduced. To implement this policy, the State Council published new standards for the establishment of county-level cities in 1993, which raised the threshold from having a non-agricultural population of WR+RZHYHUWKHLQFUHDVHRIQHZFLWLHVGLGQRWVORZGRZQLQSDUWGXH to the momentum from the previous phase, and in part stimulated by the boom of development zones. Comparatively, the development of rural areas gradually fell behind, and the lack of coordination between the development of rural and urban areas was over the horizon.

Phase IV (1998–2003): The acceleration of urban development and an imbalanced rural-urban relationship Agricultural development was stagnant, and various social undertakings in rural areas experienced low growth rates. Now that reform and development in rural

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and urban areas was interlocked, the interaction between rural and urban areas in these two respects became an important feature of this phase.3 This was a period of accelerated urban development on the one hand, and UXUDO PDUJLQDOL]DWLRQ RQ WKH RWKHU KHQFH LPEDODQFHG XUEDQUXUDO GHYHORSPHQW Following the Asian Financial Crisis of 1997, all sectors of society were alarmed by the harm of retarded urbanization. The major obstacle to the expansion of domestic demand, it immediately rose as a key issue in the development and performance of the national economy. Urbanization was incorporated into the agenda of governments at all levels over time, becoming the central strategy for promoting economic development, resolving the Three Rural Issues, and narrowing the rural-urban divide. In the Fifth Plenary Session of the 15th CCCPC in 2000, it was proclaimed that “steady efforts should be made to promote urbanization.” A lot of government initiatives were introduced to drive the progress of urbanization, LQFOXGLQJWKHDGRSWLRQRIDSURDFWLYHÀVFDOSROLF\LVVXLQJRIQDWLRQDOERQGVDQG stimulation of domestic demand through large-scale infrastructural investment. At the same time, the launch of mortgage loan linked consumers to the process of urbanization, turning the real estate industry to be an important pillar of HFRQRPLF GHYHORSPHQW )RU WKH ÀUVW WLPH XUEDQL]DWLRQ H[SHULHQFHG KLJKVSHHG development without leading to any increase in the number of cities and towns. A WUHQGRIDFFHOHUDWLRQZDVLGHQWLÀHGZLWKWKHSURJUHVVLYHH[SDQVLRQRIWKHDYHUDJH size of cities. New built-up areas surrounding the original urban areas, development zones constituted the major space of economic development in this era. As an ideal investment environment with a high-level industrial structure and advanced technology, the development zone was deemed an important window for drawing foreign investment. As a rule of thumb, the building of development zones generally started with the construction of urban infrastructure and real estate development, which was one of the most important driving forces of urbanization during this period.

Phase V (2004 onward): Close attention to the Three Rural Issues and coordination between rural and urban areas Given the importance the government attaches to the Three Rural Issues, agricultural GHYHORSPHQW KDV EHHQ VLJQLÀFDQWO\ DFFHOHUDWHG 7KH WK 1DWLRQDO &RQJUHVV RI WKH &3& LGHQWLÀHG FRRUGLQDWHG UXUDOXUEDQ VRFLRHFRQRPLF GHYHORSPHQW WKH construction of modern agriculture, the development of the rural economy, and the increase of peasants’ income as the major missions in the development of a

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moderately prosperous society. Remarkable achievements have been made in the reform and development of rural areas, particularly in the aspects of the modern agricultural development, the building of the New Socialist Countryside, the increase of peasants’ income, and the coordinated development of rural and urban areas. 2Q )HEUXDU\   WKH &HQWUDO *RYHUQPHQW SXEOLVKHG LWV ÀUVW 1R Document in the 21st century concerning the Three Rural Issues, and the sixth of its kind related to agriculture, under the title Opinions Concerning Some Policies on Promoting the Increase of Farmers’ Income. The No.1 Documents in the years that followed, from 2004 to 2008, continued to make the Three Rural Issues the subject issue. The 2005 document urged governments at all levels to stabilize, improve, and enhance agricultural policies, strengthen the overall capacity of agricultural production, adjust the agricultural and rural economic structures, and further the rural reform. In 2007, the State Council put forward the strategies of upgrading agriculture with modern equipment, science and technology, industrial systems, modes of operation, and concepts of development, as well as modernly trained farmers. In 2008, the goals became attaining agricultural modernization with Chinese characteristics, establishing long-term mechanisms that allow industrial and urban development to drive agricultural and rural development, and forming a new structure of rural-urban integrated socioeconomic development. Following the state’s direction, local governments have accelerated the pace of urbanization and raised their goals of urban development. In 2003, 182 out of 667 Chinese cities proposed upgrading themselves into international metropolises. At the same time, the continuous expansion of urban areas has been achieved at the expense of arable land. To conclude, coordinated development between rural and urban areas is a gradual process of development. Over the years, rural and urban China has experienced a series of reforms, extending from the establishment of the household contract responsibility system and commodity economy, to the development of the socialist market economy and New Socialist Countryside.

Achievements in Rural and Urban Development since Reform and Opening Up Improvements in the capacity for agricultural production and the agricultural structure The trend of China’s agricultural growth since its reform and opening up is illustrated in Fig. 1.1. In 2007, China recorded a gross output of RMB4889.3 billion,

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which, when calculated using comparable prices, was 553.6% of that in 1978. With the growth of agricultural production, the internal structure of agriculture has FKDQJHGVLJQLÀFDQWO\7KHUDWLREHWZHHQIDUPLQJIRUHVWU\DQLPDOKXVEDQGU\DQG ÀVKHU\ FKDQJHG IURP  LQ  WR  LQ 4 6SHFLÀFDOO\ the proportion of crop and plant cultivation decreased by 29.6%, while the share RIDQLPDOKXVEDQGU\DQGÀVKHU\LQFUHDVHGE\DQGUHVSHFWLYHO\:LWKLQ crop and plant cultivation, the proportion of food crops reduced against the expansion of commodity and other crops. This indicates a favorable environment IRU WKH GHYHORSPHQW RI FRPPRGLW\ DQG RWKHU SURÀWDEOH FURSV WKDW PHHW PDUNHW demand and supply ample raw materials for the processing of agricultural sideline products, fostering the development of agro-based light industries and opening up a new source of income for peasants. In 2007, food crops took up 68.8% of the sowing area of all crops, a drop of 11.5% when compared to 80.3% in 1978, whereas commodity crops accounted for 26.8%, up 17.2% when compared to 9.6% in 1978. Fig. 1.1

The trend of agricultural growth in China since 1980

(%) 112.0 110.0 108.0 106.0 104.0 102.0 100.0

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Year Total agricultural output index Note:

The output of the previous year is assumed to be 100%.

The continuous growth in agricultural output has greatly improved the material standards of the Chinese population. In 2007, China’s grain output reached 502 million tons, output of oil-bearing crops 25.69 million tons, and output of aquatic products 47.475 million tons, which were 1.65, 4.92, and 10.2 times, respectively,

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PRUHWKDQWKHÀJXUHV/LNHZLVHWKHPHDWRXWSXWRI&KLQDDPRXQWHGWR million tons in 2007, 1.5 times over that in 1996. Simultaneously, the per capita VKDUHRIDJULFXOWXUDOSURGXFWVDOVRH[SHULHQFHGDVXEVWDQWLDOLQFUHDVH)RUWKHÀUVW time since 1985, the grain yield increased for four successive years from 2004 to 2007. During this period, the grain yield per unit area exceeded 300 kg for four successive years, hitting an all-time high of 317 kg in 2007. In parallel, the per capita share of grain, oil-bearing crops, and aquatic products surpassed that in 1978 by 1.2, 3.55, and 7.4 times, respectively, at 381 kg, 19.5 kg, and 36.02 kg. An equally impressive increase was recorded for pork, beef, and mutton, which rose 4.4 times to arrive at 40.1 kg. Likewise, the degree of the agricultural modernization has been increased, accompanied by the improvement of production conditions. By the end of 2007, 2.06 million large and medium-sized agricultural tractors and 16.19 million small tractors had been utilized in China, 3.7 times and 11.8 times more than the numbers toward the end of 1978, respectively. In 2007, China had a total effective irrigated area of 56.52 million hectares, boasting an extension of 25.7% since 1978.

The rapid development of non-agricultural industries and the acceleration of urbanization The penetration of the household contract responsibility system triggered off the boom of new TVEs, and the development of non-agricultural industries in rural areas, especially rural industries, facilitated agricultural industrialization. By combining into cooperative organizations, rural households with scattered land, a small scale of operation, and low levels of technology managed to gain a share in WKHEHQHÀWVRIFROOHFWLYHSURGXFWLRQSURFHVVLQJDQGORJLVWLFV:LWKDQLPSURYHG capacity for risk resistance, peasants’ income was stabilized and rose. There was also an increase in large-scale operation in general. Statistics from the Bureau of Rural and Township Enterprises under the Ministry of Agriculture shows that TVEs achieved a total industrial output of RMB18,200 billion in 2006, 14.3 times exceeding that of 1992.5 The added value of TVEs amounted to RMB6,800 billion in 2007, sharing 28% of the GDP, among which industrial value-added accounted for RMB4,900 billion, or 45% of the total industrial value-added in China. In the same year, new businesses founded by farmers-turned-workers who returned to their native places totaled 850,000, contributing to an accumulated total of 5 million, which could provide as many as 30 million job opportunities in total.6 From the perspective of employment structure, the proportion of agricultural workers dropped from 70.5% in 1978 to 40.8% in 2007, a decline of 29.7%. It is

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estimated that TVEs has absorbed around 50% of the surplus rural labor force. Thus, TVEs have been, and will continue to be the main channel of alternative employment and income rise for peasants.7 At the end of 2006, households which depended on agriculture as their main source of income made up 58.4% of all households engaged in the agricultural industry, down 7.2% compared to 1996.8 As for the trend of growth in peasants’ per capita net income, a faster pace was observed in the early 1990s, especially from 1992 to 1996, while the year 1997 marked the beginning of deceleration. The rapid upward trend resumed into the 21st century, especially after 2004, climbing to a decade high of 9.5% in 2007. Just as TVEs and urban industries complement each other, rural industrialization has the effect of stimulating rural urbanization.

The steady increase of peasants’ income and quality of life In 2007, the per capita net income of peasants in China was RMB4,140, an improvement of RMB4,006 compared to 1978, suggesting an average annual increase of RMB134. Since 2004, the growth rate of rural residents’ per capita net income has been on the rise, surging from 4.6% in 1997 to 9.5% in 2007. It is worth noting that peasants’ income grew more than RMB300 per year for four successive years from 2004 to 2007, with a historic high of RMB553 in 2007 (see Fig. 1.2). Fig. 1.2

The per capita net income of Chinese peasants since 1978

(RMB) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000

2007

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The change of the rural employment structure has been accompanied by SDUDOOHOPRGLÀFDWLRQVLQSHDVDQWV·LQFRPHVWUXFWXUH)LUVWZDJHVEHFDPHWKHPDLQ source of peasants’ income. In 2007, the per capita wage income of peasants was RMB1,596, 38.6% of their per capita net income, up 18.4% when compared to 20.2% of 1990. In terms of income growth, the contribution of wage income amounted to 40%. Second, the proportion of household business income has been decreasing continuously. The per capita household business income was RMB2,194 in 2007, constituting 53% of peasants’ per capita net income, which was 22.7% less than in 7KLVUHÁHFWVWKHVLJQLÀFDQFHRIQRQDJULFXOWXUDOLQGXVWULHVWRWKHSURVSHULW\ of rural areas. The continuous increase of income has provided a solid foundation for the improvement of rural residents’ living conditions. Compared to 1990, the per capita living expenses of rural residents rose 5.5 times from RMB585 to RMB3,224 in 2007, with an annual increase of RMB155 on average. Accordingly, the consumption structure of rural residents has been upgraded, so have their living VWDQGDUGV7KLVLVÀUVWUHÁHFWHGLQWKHGURSRIWKH(QJHO·V&RHIÀFLHQWIURP in 1978 to 43.1% in 2007, a decline of 24.6% (as shown in Fig. 1.3). Second, rural UHVLGHQWV·H[SHQGLWXUHVRQFXOWXUHHGXFDWLRQDQGHQWHUWDLQPHQWKHDOWKFDUHDQG transportation and communications increased to RMB305, RMB210, and RMB328, UHVSHFWLYHO\LQZKLFKZHUHWLPHVWLPHVDQGWLPHVRYHUWKHÀJXUHV of 1990. Third, the proportion of cash consumption has expanded, growing 21.8% from 64% in 1990 to 85.8% in 2007, with the amount surging 7.38 times from RMB375 to RMB2,767. Such an expansion can be regarded as a sign of the increasing marketization of rural residents’ consumption behavior. The last indicator is the increasing presence of information devices, alongside durable consumer goods like refrigerators, in rural households. In 2007, the number of telephones, mobile phones, and computers owned by every hundred rural households was 68.4, 77.8, and 3.7, respectively, surpassing that of 2000 by 42, 73.5, and 3.2. Peasants’ living conditions have been improved remarkably. According to the statistics of the second national agricultural census of China, at the end of 2006, each rural household owned a residential area of 128 square meters, and 99.3% of these households had their own houses, the majority being bungalows. The rapid growth of peasants’ net income has effectively alleviated rural poverty. The size of the impoverished and low-income population in rural areas has been shrinking. Taking RMB785 as the absolute poverty line in rural China , the impoverished rural population at the end of 2007 was 14.79 million, a year-overyear reduction of 6.69 million, and 235.21 million smaller than the 250 million in 1978. In terms of poverty incidence, a drop from 30.7% in 1978 to 1.6% in 2007 was recorded.

12 CE_CH1.indd 12

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Rural and Urban Development in China: Process, Problems, and Future Choices

)LJ

7KHWUHQGRIFKDQJHVLQWKH(QJHO·V&RHIÀFLHQWRI&KLQD·VUXUDO households since 1978

(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1982

1991

1990

1985

1980

0

1978

10.0

Year

Continual changes in the rural appearance and gradual establishment of the social security system Thanks to the gradual improvement of rural infrastructure, peasants have been enjoying more convenience and more hygienic living conditions. According to the statistics of the second national agricultural census of China, at the end of 2006, 9.6% of all towns in China were supplied with train stations, 88.4% savings institutions, and 68.4% shopping malls. For villages, 95.5% were connected with highways, 98.7% were equipped with power supply, while 97.6% could receive television programs. Concerning sanitation, drinking water in 24.5% of China’s YLOODJHVZDVSXULÀHGE\FHQWUDOL]HGWUHDWPHQWRIWKHVHYLOODJHVKDGELRJDV digesters installed, and 36.7% of the Chinese towns contained refuse depots. The social service mechanism in rural China has been coming into shape and gradually improving. At the end of 2006, 10.8% of the Chinese towns had vocational schools, 98.8% had hospitals or public healthcare centers, while 66.6% had homes for the aged. In rural areas, 87.6% of the villages had a primary school within 3 km, 10.7% sports grounds, and 13.4% small libraries and/or cultural stations.9 Since the 16th National Congress of the CPC, investment in rural social undertakings has been increased, contributing to the acceleration of coordinated socioeconomic development in rural areas. By the end of 2007, 2,448 — or 85.6% of all — counties (or county-level cities and districts) had been established as pilot areas for the state’s new cooperative medical system, with an impressive

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CHINA’S ECONOMY ISSUES 8

730 million (85.7%) rural participants. In 2006, all primary and secondary school students covered by compulsory education in the western region were exempt from tuition fees and related miscellaneous expenses. Students from needy families were exempt from textbook expenses, and extra living allowance was granted if they were boarding students. In the western and central regions of China, a total of 52 million primary and secondary school students in the pilot areas received exemptions from tuition fees and miscellaneous educational expenses, bringing a far-reaching impact on the improvement of rural education while lifting peasants’ burdens. Moreover, the number of participants in the minimum living allowance scheme has also witnessed a substantial increase. In 2007, 35.66 million rural UHVLGHQWVEHQHÀWHGIURPWKHVFKHPHLQWRWDOPHDQLQJPLOOLRQPRUHWKDQWKH previous year. Comparing to 32.58 million in 2002 reveals an increase of 10.58 times.

Rapid urban development and rural -urban reciprocal advancement Compared to the abovementioned achievements of rural development, the development of urban areas in China since its reform and opening up has been even more rapid. As discussed, urban development was resumed during 1978 to 1985, and the Third Plenary Session of the 11th CCCPC in 1978 set off the rural economic reform. The promotion of the household contract responsibility system proved to be a great motivation for the Chinese peasants. During this period, the number of cities in China rose from 193 to 324, up 67.9% with an average annual increase of 18.7%. The total urban population of China surged from 172.45 million to 259.04 million at an annual rate of 5.5%. The level of urbanization in terms of the proportion of urban population grew from 17.9% to 23.7%, with an annual growth UDWH RI  RQ DYHUDJH 6LPSO\ SXW XUEDQL]DWLRQ GXULQJ WKLV SHULRG EHQHÀWHG from the resumption of growth after the Cultural Revolution, resulting in the simultaneous prosperity of rural and urban areas. +RZHYHU DIWHU  XUEDQL]DWLRQ DQG RYHUKHDWHG HFRQRPLF JURZWK EURXJKW adverse effects to the development of urban areas. The reckless expansion of urban areas, coupled with the unauthorized establishment of development zones and investment towns in some regions, ended up in economic bubbles of real estates and development zones, which not only obstructed the original planning of urban areas, but also led to the wasting of land and a huge amount of non-performing assets. As a result, the government had to carry out control and regulation of the national economy and to induce a soft landing. Moreover, urban reform and the restructuring of state-owned enterprises also produced a large number of laid-off workers, impairing the capacity of urban areas for absorbing rural labor forces.

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Rural and Urban Development in China: Process, Problems, and Future Choices

In 2006, the urban population of China amounted to 577.06 million, meaning that it had increased by 14.45 million each year on average during the period of 1978 to 2006. In the same period, the urbanization rate rose from 17.9% to 43.9%, indicating an average annual increase of approximately 1%. In 2007, the total urban population climbed to 593.79 million, with an urbanization rate of 44.9%. 6XFKDJURZWKUDWHRIXUEDQL]DWLRQLVVLJQLÀFDQWDQGSURPLQHQWLQWKHKLVWRU\RI urbanization all over the world. The facilitating effects urbanization has on China’s socioeconomic development are evident:

The co-development of urbanization and industrialization As the concentration of human activities is the only way to reduce industrial production costs, agglomeration is an essential component of industrialization. In other words, urban areas provide the best conditions for industrial development. :LWKRXW XUEDQL]DWLRQ WKH HIÀFLHQF\ RI LQGXVWULDOL]DWLRQ ZLOO EH GUDVWLFDOO\ reduced, and the absence of industrialization will deprive urbanization of a clear objective and the momentum that comes with it. Precisely, industrialization is the economic connotation of urbanization, and urbanization the spatial expression of industrialization. Mutually enhancing, they together determine the process of a country’s socioeconomic development. Today, urbanization in China is a reciprocal, interactive process that occurs alongside the continuous development of industrialization. Arisen in the backdrop of socioeconomic development, it is characterized by the continuous conversion of rural factors into urban factors, and the dissemination of urban factors in rural DUHDV+RZHYHUXSXQWLOWKHLQLWLDOVWDJHRI&KLQD·VUHIRUPDQGRSHQLQJXSLWZDV detached from industrialization due to the constraints of traditional systems, which in turn hindered the development of industrialization. Thanks to new initiatives of industrialization brought by the reform and opening up policy, urbanization has since taken off, with the problem of retarded urbanization gradually disappearing LQWR WKH VHFRQG KDOI RI WKH V 7KH PXWXDOO\ EHQHÀFLDO UHODWLRQVKLS EHWZHHQ XUEDQL]DWLRQDQGLQGXVWULDOL]DWLRQZDVÀQDOO\HVWDEOLVKHG Table 1.1 compares China with countries at varying levels of development in terms of the relationship between urbanization and industrialization. In 2007, the per capita GDP of China reached USD2,490, equivalent to 53.9% of that of uppermiddle-income countries and 2.18 times of that of lower-middle-income countries in 2000. In terms of the increase of non-agricultural industries, the proportion of China was equivalent to 104.3% of that of lower-middle-income countries in the

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CHINA’S ECONOMY ISSUES 8

same time span. As for urbanization rate, that of China in 2007 was equivalent to 104% of the average of lower-middle-income countries in 1999. To give a summary, while urbanization in China slightly falls behind most lower-middle-income countries using per capita GDP as an index, it slightly outpaces these countries when measured against their industrial structures. In general, compared with lower-middle-income countries, the levels of urbanization and industrialization in China are compatible. It can thus be concluded that China lies halfway between lower-middle-income and upper-middle-income countries. Considering its huge rural population, the relationship between urbanization and industrialization is reasonable. The discrepancy between their pace of development has been gradually UHFWLÀHG Table 1.1

The relationship between industrialization and urbanization of countries at various levels of development from 1999 to 2002

Item

LowerThe Lowmiddlewhole income income world countries countries

Upper+LJK Standard middleincome China of middle income countries income countries

Per capita GDP (USD)

5,150 (48.3)

420 (593)

1,140 (218.4)

4,620 (53.9)

27,510 (9.1)

2,490 (100)

2,880 (86.5)

Proportion of growth of nonagricultural industries (%)

94 (94.4)

77 (115.2)

85 (104.3)

92 (96.4)

98 (90.5)

88.7 (100)

88.5 (100.2)

Urbanization level (%)

46 (98)

31 (145)

43 (104)

76 (59)

77 (58)

44.9 (100)

59.5 (75.5)

1RWH

7KHGDWDLQSDUHQWKHVHVVKRZVWKHSURSRUWLRQRIWKHÀJXUHRI&KLQDWRWKRVHRIWKH same row. All data of China was collected in 2007, with per capita GDP converted based on the average exchange rate of USD100 to RMB760.4. For other countries, data of per capita GDP and the proportion of the growth in non-agricultural industries comes from 2002, whereas that of urbanization level 1999.

Sources: World Development Report²DQG China Statistical Yearbook, 2008.

Urban areas as space for economic development Urban areas provide the ideal space for factor accumulation, economic development, and the development of various industries. As gathering places RI WKH SRSXODWLRQ WKH\ DUH ZKHUH VSHFLDOL]HG WDOHQWV RI YDULRXV ÀHOGV PHHW WR

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Rural and Urban Development in China: Process, Problems, and Future Choices

contribute to socioeconomic development. The gathering of technical talents, for example, makes the urban space an incubator of new technologies. Furthermore, large-scale population agglomeration in urban areas has the effect of generating huge consumer demand and improving the utilization rate of public facilities. Urban areas gather secondary industries, allowing for industrial agglomeration, which is conducive to the specialized division of labor, the establishment of associated industries and markets, and the lowering of production and logistics costs. Areas where industrial clusters are rooted are developed into economic growth poles that not only attract external capital and technologies, but also drive the economic growth of the surrounding areas, thereby fostering the development and competitiveness of the entire region. At present, China has a substantial portion of urban areas with well-developed industrial clusters that are characterized by high levels of economic development and urbanization. Similarly, urban areas also serve as bases for the development of tertiary industries. Essentially an industry of consumption thriving with changes in the forms of human settlement, tertiary industry is born out of urban areas. The larger an urban area, the more extensive the scope of the tertiary industry. The high degree of division of labor and collaboration within and between secondary and tertiary industries has contributed greatly to economic prosperity and development.

Infrastructural advancement From a statistical point of view, the driving forces of economic development can be divided into stimulating consumption, expanding export, and increasing LQYHVWPHQW$VWKHIRFXVRILQYHVWPHQWXUEDQDUHDVPDNHURRPIRUWKHHIÀFLHQW agglomeration of infrastructure, which provides the material foundation and support for urban development in return. With the characteristics of large-scale operation and economies of agglomeration, urban areas effectively draw in various LQGXVWU\ FKDLQV DWWUDFWLQJ WKH LQÁRZ RI SRSXODWLRQ PDWHULDOV DQG LQIRUPDWLRQ facilitating the development and perfection of various kinds of infrastructures, LQFOXGLQJ WUDQVSRUWDWLRQ FRPPXQLFDWLRQ ÀQDQFH VFLHQFH DQG WHFKQRORJ\ information, and services.

Conspicuous Problems in Rural and Urban Development Despite the achievements in socioeconomic development since the reform and opening up of China, there exist some conspicuous problems in the imbalanced development of rural and urban areas. 17 CE_CH1.indd 17

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CHINA’S ECONOMY ISSUES 8

The uncoordinated pace of development between rural and urban areas First, the rapid expansion of urban areas at all levels has reinforced the dual structure that divides modern urban areas and traditional rural areas. The failure to promote the synchronous development of rural and urban areas KDVH[DFHUEDWHGWKHRXWÁRZRIUHVRXUFHVDQGRSSRUWXQLWLHVRIGHYHORSPHQWIURP agriculture to industry and from rural areas to urban areas. While previous studies have laid more emphasis on the qualitative description than the quantitative measurement of the dual structure, we will measure it in terms of the prominence RIWKHGXDOHFRQRPLFVWUXFWXUHZKLFKFDQEHTXDQWLÀHGE\FDOFXODWLQJWKHODERU productivity of agricultural and non-agricultural industries, and their contrast FRHIÀFLHQW7KHIRUPXODLVDVIROORZV Agricultural comparative labor productivity (L1) 'XDOFRQWUDVWFRHIÀFLHQW(  (1–1) Non-agricultural comparative labor productivity (L2) International experience shows that during the strengthening of the dual economy, the comparative labor productivity of the agricultural sector will decrease gradually while that of non-agricultural sectors will increase gradually, meaning WKDWWKHGXDOFRQWUDVWFRHIÀFLHQWZLOOPRYHIXUWKHUDQGIXUWKHUDSDUWIURP2Q WKHFRQWUDU\LIWKHGXDOFRQWUDVWFRHIÀFLHQWJUDGXDOO\LQFUHDVHVWRZDUGWKHGXDO economic structure will be weakening. The per capita income of rural and urban areas and comparative labor productivity of China during the period of 1978 to 2007 are shown in Table 1.2, which shows an increase in agricultural comparative labor productivity and decrease LQ QRQDJULFXOWXUDO FRPSDUDWLYH ODERU SURGXFWLYLW\ 7KH GXDO FRQWUDVW FRHIÀFLHQW increased from 0.16 to 0.24, indicating the weakening of the dual structure. During this period, the growth rate of the per capita income of peasants was higher than that of urban residents. Since 1985, the overall agricultural comparative labor SURGXFWLYLW\ KDV EHHQ RQ WKH GHFOLQH ZKHUHDV ÁXFWXDWLRQV DQG D GRZQZDUG WHQGHQF\DUHLGHQWLÀHGLQQRQDJULFXOWXUDOFRPSDUDWLYHODERUSURGXFWLYLW\ 'XULQJ WKH SHULRG RI  WR  WKH GXDO FRQWUDVW FRHIÀFLHQW ÁXFWXDWHG between 0.24 and 0.25, and the income growth rates of rural and urban residents were maintained in a state of equilibrium in general. From 1991 to 1996, the FRQWUDVWFRHIÀFLHQWIHOOEHIRUHULVLQJZKLOHIURPWRLWWUHQGHGWRZDUG JUDGXDOGHFUHDVH6LQFHWKHFRHIÀFLHQWKDVEDVLFDOO\VWRRGDURXQG1R sign of approaching 1 is seen in all the mentioned periods. Although the value of 2007, 0.18, was 0.06 below that of 1985, there was a big gap in the income

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Rural and Urban Development in China: Process, Problems, and Future Choices

Table 1.2

The per capita income of rural and urban areas of China and the agricultural and non-agricultural comparative labor productivity

Item Per capita income in rural and urban areas A

Index

B

Index

Year

Comparative labor productivity

Dual NonA/B Agriculture agricultural contrast %  industries FRHIÀFLHQW

1978

343

100

134

100

2.57

0.40

2.43

0.16

1985

739

231

398

297

1.86

0.46

1.90

0.24

1990

1,510

440

686

512

2.20

0.45

1.83

0.25

1994

3,496

1,019

1,221

911

2.86

0.36

1.75

0.21

1996

4,839

1,411

1,926

1,437

2.51

0.39

1.62

0.24

1998

5,425

1,582

2,162

1,613

2.51

0.35

1.64

0.21

2000

6,280

1,831

2,253

1,681

2.79

0.30

1.70

0.18

2002

7,703

2,246

2,476

1,848

3.11

0.27

1.73

0.16

2004

9,422

2,746

2,936

2,191

3.21

0.29

1.63

0.18

2005

10,493

3,059

3,255

2,429

3.22

0.27

1.59

0.17

2006

11,759

3,428

3,587

2,677

3.28

0.27

1.54

0.17

2007

13,786

4,019

4,140

3,090

3.33

0.28

1.50

0.18

Note:

“A” represents the per capita disposable income of urban households (RMB), while “B” represents the per capita net income of rural households (RMB). The indexes are calculated based on current prices for the comparison between “A” and “B” only. Source: China Statistical Yearbook, 2008.

growth rates between rural and urban residents. This shows that the dual structure of rural and urban areas has been enhanced in China, with their relationship entering into another stage of incoordination and imbalanced development, deviating from the nation’s goal of economic development. One of the major causes lies in the lack of investment in rural areas and the RXWÁRZ RI UXUDO IXQGV WR XUEDQ DUHDV WKURXJK WKH WD[DWLRQ V\VWHP WKH ÀQDQFLDO system, and investment channels. As observed from Table 1.3, during the period of 1998 to 2006, a total of RMB8115.5 billion rural funds were lost through the taxation DQGÀQDQFLDOV\VWHPVZKLFKPHDQVDQDYHUDJHDQQXDOORVVRI50%ELOOLRQRU 27.6% more every year. As such, urbanization was unable to enhance agricultural and rural development. The cumulative effects of regional development have enhanced the rural-urban dual structure. The second factor is the limited sources of income for peasants, and the slow income growth rate resulted throughout the three decades following China’s reform and opening up. First, fundamental changes in the supply and demand

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CHINA’S ECONOMY ISSUES 8

VWUXFWXUHRIDJULFXOWXUDOSURGXFWVKDYHLQFUHDVHGWKHGLIÀFXOW\LQREWDLQLQJKLJKHU UHWXUQV 6HFRQG WKH ULVLQJ FRVWV RI DJULFXOWXUDO SURGXFWLRQ UHGXFH WKH SURÀW margins of agriculture. Third, the slow improvement of relative agricultural labor productivity provides a weak foundation for income growth. We have measured the comparative relationship between the increase of the per capita net income of peasants and the per capita disposable income of urban UHVLGHQWVXVLQJWKHLQFRPHFRQWUDVWFRHIÀFLHQWVHH7DEOH  ,QFRPHFRQWUDVWFRHIÀFLHQW*  7DEOH

Growth rate of peasants’ per capita net income (G1) (1–2) Growth rate of urban residents’ per capita disposable income (G2)

7KHRXWÁRZRIUXUDOIXQGVLQ&KLQDIURPWR (RMB100 million) Taxation system

Year

Financial Taxes Agricultural support for from taxes agriculture TVEs

Financial system Net Rural RXWÁRZ deposit

Rural loan

Total net Net RXWÁRZ RXWÁRZ

1998

1,155

399

1,583

827

12,189

10,024

2,165

2,992

1999

1,086

424

1,789

1,128

13,344

10,954

2,390

3,517

2000

1,232

465

1,997

1,230

14,998

10,950

4,048

5,279

2001

1,457

482

2,307

1,333

16,905

12,125

4,780

6,113

2002

1,581

718

2,693

1,830

19,170

13,697

5,473

7,304

2003

1,754

872

3,131

2,248

23,076

16,073

7,003

9,251

2004

2,338

902

3,659

2,223

26,292

17,912

8,380

10,603

2005

2,450

936

5,180

3,666

30,810

19,432

11,378

15,044

2006

3,173

1,084

6,352

4,263

36,219

19,430

16,789

21,052

Total

16,225

6,282

28,691

18,748

193,003 130,596

62,407

81,155

1RWH

8QGHU´ÀQDQFLDOV\VWHPµ´UXUDOGHSRVLWµLVWKHVXPRIDJULFXOWXUDOGHSRVLWDQG IDUPHUV·VDYLQJV´UXUDOORDQµLVWKHVXPRIDJULFXOWXUDOORDQDQG79(ORDQDQG ´QHWRXWÁRZµLVWKHGLIIHUHQFHEHWZHHQUXUDOGHSRVLWDQGUXUDOORDQ Sources: China Statistical YearbookChina’s Financial YearbookDQG)DQ/L[LD´2Q the Three Major Contributions of China’s Township and Village Enterprises,” Rural Economy 2 (2008).

In 2006, the ratio of employees in primary, secondary, and tertiary industries was 70.8:15.6:13.6.10 The proportions of employees in secondary and tertiary industries were extremely low, and peasants’ sources of income were very limited.

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Rural and Urban Development in China: Process, Problems, and Future Choices

Table 1.4

The comparative agricultural and non-agricultural labor productivity in China

Year

Urban residents (%) G2

Farmers (%) G1

Income contrast FRHIÀFLHQWG

1990

8.51

1.8

0.21

1992

9.73

5.9

0.61

1994

8.52

5.0

0.59

1996

3.84

9.0

2.34

1998

5.77

4.3

0.75

2000

6.43

2.1

0.33

2002

13.43

4.8

0.36

2004

7.70

6.8

0.88

2005

9.60

6.2

0.65

2006

10.40

7.4

0.71

2007

12.17

9.5

0.78

Source: China Statistical Yearbook, 2008.

7KHFRQWUDVWFRHIÀFLHQWRIWKHLQFRPHJURZWKUDWHVRIUXUDODQGXUEDQUHVLGHQWV increased continuously in the early 1990s, indicating that the income gap between WKHP ZDV QDUURZLQJ 7KH LQFRPH FRQWUDVW FRHIÀFLHQW GURSSHG IURP WKH ODWH 1990s to the early 21st century, with a corresponding expansion of the ruralurban income gap, which reached its peak between 2000 and 2003. The central government abolished agricultural taxes in 2004, when the income growth rate RISHDVDQWVLQFUHDVHGVLJQLÀFDQWO\ZLWKDFRQWUDVWFRHIÀFLHQWRI7KLVSURYHV WKHVLJQLÀFDQFHRISROLF\GHFLVLRQVLQDIIHFWLQJUXUDOLQFRPHJURZWK'HVSLWHWKH VOLJKW LQFUHDVH RI WKH FRQWUDVW FRHIÀFLHQW VLQFH  DIWHU WKH GHFUHDVH LQ  the tendency of widening rural-urban income gap has not been fundamentally reversed. Third, the uncoordinated development of rural and urban areas is most manifest LQWKHZLGHQLQJLQFRPHJDSEHWZHHQUXUDODQGXUEDQUHVLGHQWV+DYLQJH[SUHVVHG WKHGLIIHUHQFHVLQUHODWLYHWHUPVZHZLOOUHÁHFWWKHPLQDEVROXWHQXPEHUVLQ7DEOH 1.5. On the whole, the rural-urban income gap is still showing quite an obvious tendency of expansion. From 1990 to 2007, the per capita net income of rural KRXVHKROGV LQFUHDVHG IURP 50% WR 50% ZKLFK ZDV D VLJQLÀFDQW ULVH +RZHYHUGXHWRWKHODFNRIORQJWHUPPHFKDQLVPIRUVWDEOHLQFRPHJURZWKWKH general tendency of widening income gap has not been restrained.

21 CE_CH1.indd 21

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CHINA’S ECONOMY ISSUES 8

Table 1.5

Year

Comparison of the per capita income of rural and urban residents in China Per capita disposable income of urban households (RMB)

Per capita net income of rural households (RMB)

Ratio of income of urban residents to rural residents (RMB)

1990

1,510

686

2.20

1992

2,026

784

2.58

1994

3,496

1,221

2.86

1996

4,839

1,926

2.51

1997

5,160

2,090

2.47

1998

5,425

2,162

2.51

1999

5,854

2,210

2.65

2000

6,280

2,253

2.79

2002

7,703

2,476

3.11

2003

8,472

2,622

3.23

2004

9,422

2,936

3.21

2005

10,493

3,255

3.22

2006

11,759

3,587

3.28

2007

13,786

4,140

3.33

Source: China Statistical Yearbook, 2008.

As shown in Fig. 1.4, the ratio of urban residents’ per capita disposable income to peasants’ disposable net income was 2.47:1 in 1997, 2.51:1 in 1998, and 2.65:1 in 1999. This ratio increased to 3.23:1 in 2003, 3.28:1 in 2006, and 3.33:1 in 2007. 7KH UXUDOXUEDQ LQFRPH JDS FDQ DOVR EH UHÁHFWHG LQ WKH FRQVXPSWLRQ OHYHOV of rural and urban residents. During the period of 1978 to 2007, the per capita consumption expenditure of urban residents increased from RMB311 to RMB9,998, indicating a per capita growth of RMB9,687 and an average annual growth of RMB334. The per capita consumption expenditure of peasants increased from RMB116 to RMB3,224, showing a per capita growth of RMB3,108 and an average annual growth of RMB107. This comparison reveals that the increase of the per capita consumption expenditure of rural residents was only 32.1% of that of urban residents. It is particularly worth noting that, due to the stagnation of peasants’ income during the six years from 1997 to 2003, the per capita consumption expenditure of peasants increased only by RMB326.1 (from RMB1,617.2 to

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Rural and Urban Development in China: Process, Problems, and Future Choices

RMB1,943.3), compared to RMB2,325.3 (from RMB4,185.6 to RMB6,510.9) of urban residents. That is to say, rural residents only experienced 14% of urban residents’ increase during the six years. Fig. 1.4

Comparison of the income of urban and rural residents in China

16,000 14,000

10,000

12,000 8,000

10,000

6,000

8,000 6,000

4,000

4,000 2,000

0

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1982 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

2,000

0

Absolute difference in the income of rural and urban residents

12,000

Year Per capita disposable income of urban households (RMB) Annual per capita net income of rural residents (RMB) Difference in income (RMB)

7KH *LQL &RHIÀFLHQW WKDW H[SUHVVHV WKH GHJUHH RI LQFRPH GLVSDULW\ KDV LQ JHQHUDOEHHQJURZLQJVLQFHWKHPLGV,QWKH(QJHO&RHIÀFLHQWRIXUEDQ households was 43.1%, 6.8% lower than that of urban households (36.3%), which KDG D VLPLODU (QJHO &RHIÀFLHQW D GHFDGH DJR ,Q WKH VDPH \HDU WKH SRSXODWLRQ below the poverty threshold in rural areas still stood as high as 14.79 million, and the low-income 3.9%.

The weakened foundation of agricultural development China is experiencing the gradual transition from a traditional agrarian society to a modern industrial society, whose progress is subject to the relationship between rural and urban development. The weakening of agriculture as the foundation of the national economy has reduced the room for closing the gap between rural and XUEDQDUHDV+HUHDUHWKHOLPLWDWLRQVRI&KLQD·VDJULFXOWXUDOGHYHORSPHQW

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CHINA’S ECONOMY ISSUES 8

Low agricultural productivity Agricultural modernization has yet to be completed due to low agricultural productivity. The failure to implement intensive farming means that agricultural production still remains in a small scale and decentralized in most cases. In some regions, manual and semi-mechanized agricultural production still dominates. The levels of materials, technical equipment, and labor productivity remain low in general. In spite of the attempts to experiment intensive operation on the basis of small-scale production under the framework of agricultural industrialization in recent years, its driving force has been constrained by small-scale operation. A “risk DQGSURÀWVKDULQJµPHFKDQLVPKDVQRWEHHQSURSHUO\HVWDEOLVKHGEHWZHHQOHDGLQJ enterprises and rural households. Moreover, small-scale operation has also resulted in lots of pollution, leading to the deterioration of the ecological environment. For instance, the cultivation of barren hills and wasteland, overgrazing, and the abuse of pesticides has led to serious soil erosion, decline in soil fertility, and the deterioration of the farmland ecosystem. Moreover, structural contradictions of agricultural production are still prominent. China’s entry into the WTO has brought a great challenge to the trading of agricultural products. The gap between the product structure of agriculture and market demand, together with the retardation of market informatization and OLPLWDWLRQVLQWUDQVSRUWDWLRQFDSDFLW\KDVSUHYHQWHGWKHFRPPRGLÀFDWLRQRIIDUP produce. Thus, Chinese agriculture has not been able to keep pace with changes in the supply and demand of the global market. Taking grain as an example, although China’s grain yield increased for four successive years starting from 2003, the supply-and-demand gap has not been FORVHG$VRIWKHUHZDVVWLOODVLJQLÀFDQWGLIIHUHQFHRIPLOOLRQWRQVVHH Table 1.6). The import and export of grain in China since 1990 will be demonstrated in Table 1.7. 7DEOH

Item Grain yield Year-on-year increase

7KHSURGXFWLRQDQGFRQVXPSWLRQRIJUDLQLQ&KLQDIURPWR 2007 (10,000 tons) 2001

2002

2003

2004

2005

2006

2007

45,264

45,706

43,070

46,947

48,402

49,804

50,160

–954

442

–2,636

3,877

1,455

1,402

356

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Rural and Urban Development in China: Process, Problems, and Future Choices

(Cont’d) Item

2001

2002

2003

2004

2005

2006

2007

Grain consumption

48,251.4

48,350

48,625

49,090

49,775

50,800

51,000

Year-on-year increase

547.9

98.6

275

465

685

1,025

200

Productionconsumption

–2,987.4

–2,644

–5,555

–2,143

–1,373

–996

–840

Sources: China Statistical Yearbook  6XUYH\ 7HDP RI 5XUDO (FRQRP\ DQG 6RFLHW\ RI the National Bureau of Statistics, A Study on Food Issues of China (Beijing: China 6WDWLVWLFV3UHVV 1LH=KHQEDQJGrain Development Report of China (2004, 2005 and 2006) %HLMLQJ (FRQRPLF 0DQDJHPHQW 3UHVV   ´'RPHVWLF )RRG 6XSSO\ and Demand Basically Balanced and Market Stable,” National Development and Reform Commission, May 6, 2008.

  Despite the rise in prices of agricultural products in recent years, we estimated that peasants only enjoy about 30% of the rise.11 At the same time, the increase of the expenditure that farmers pay in response to the rise of prices of a variety of means of productions has been more than their additional income from the rise of prices of agricultural products. In such a case, China does not have adequate conditions for increasing farmers’ incomes while achieving agricultural modernization. Table 1.7 Item

The import and export of grain in China since 1990 (10,000 tons) 1990

Import

1995

2000

2001

2002

1,372.4 2,226

1,408

1,743

1,456

973

Export

625.1

214

Net import

747.3 2,012

Net export

—

—

— 48

2003

2004

2005

1,417 2,293.3

2,998

3,286 3,186.5 3,297

1,596 2,437.3

506

770

—

—

—

179

144.0

2,492 —

1,054

2006

2007

649.5 1,032

2,232 2,537.0 2,265 —

—

—

Sources: Nie Zhenbang, China Food Development Report 2006 (Beijing: Economic Management 3UHVV   ´$QVZHUV RI 1DWLRQDO )RRG $XWKRULW\ WR 4XHVWLRQV RQ &XUUHQW Situation of Food Supply and Demand,” China Internet Information Center, February 2, 2008.

The slow development of rural industries China’s rural industries have emerged against the backdrop of underdeveloped urban industrialization and serious short supply of industrial products. The product structure of rural industries is simple, with the predominance of low-end products. There has been some progress in the upgrade of rural industries in recent years, as characterized by the formation of rural industrial and enterprise clusters, but 25 CE_CH1.indd 25

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CHINA’S ECONOMY ISSUES 8

on the whole, the traditional constraints of simple industrial structure, slow pace of advancement, and low-end products remain. Moreover, the low value-adding nature of industrial products, together with the problems of poorly established operational mechanism, unclear property rights, low level of management, and backward science and technology have hindered the development of a virtuous cycle in rural industrialization. The rural-urban gap with regard to education, healthcare and other fundamental SXEOLFVHUYLFHVKDVQRWEHHQLPSURYHGVLJQLÀFDQWO\ For a long time, industrial and urban developments in China have developed at the expense of agricultural and rural developments. This has enabled the rapid development of urban areas, and yet the small proportion of investment in rural areas means that the conditions of rural roads, electricity, and other infrastructure have remained poor. The supply of public facilities such as schools, hospitals, post RIÀFHV VKRSV DQG FXOWXUDO YHQXHV LV H[WUHPHO\ LQDGHTXDWH DQG FRQGLWLRQV RI production and living conditions are substandard. It is estimated that only 28.2% or the rural areas in China met the requirements of a “comprehensive moderately prosperous society” in terms of the index of quality residence in 2005.12 From the perspective of educational expenditure, the gap between rural and urban areas in terms of the educational funding for each student in the budget of 2005 was: RMB195 for junior high schools and RMB124 for primary schools.13 Regarding public health, the infant mortality rate in rural areas was four times higher than that of urban areas in 2003, with the mortality rate of rural pregnant women being 2.4 times higher than that of their urban counterparts. Moreover, the average life expectancy in rural areas was 6 years less than that in urban areas. In 2005, China’s urban population, which accounted for 44% of the total population, used 73% of the total healthcare resources, while the rural population, which accounted for 56% of the total population, used only less than 30% of them.14 Data on the per capita health care expenditure of rural and urban residents in China during the period of 1990 to 2007 shows that while that of urban residents has LQFUHDVHGVLJQLÀFDQWO\\HDUE\\HDUWRUHDFK50%LQWKHLQFUHDVHIRUUXUDO residents has remained low, with merely RMB210 in 2007. As for social security, urban areas now enjoy quite a comprehensive social security system which, however, is far from perfect in rural areas. Take the oldaged insurance as an example: in 2007, 33.9% of urban residents (201.369 million) had participated in the basic old-aged insurance scheme, while only 7.1% of rural residents (51.715 million) had done so.

The issues of land and peasants in the development of rural and urban areas 26 CE_CH1.indd 26

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Rural and Urban Development in China: Process, Problems, and Future Choices

,QUHFHQW\HDUVVHULRXVVSDWLDOGLVRUGHUKDVEHHQLGHQWLÀHGLQWKHGHYHORSPHQWRI rural and urban areas in China, which is most typically expressed in the presence of urban sprawl and large-scale occupation of arable land, which has brought about a huge number of landless peasants.

The urbanization of land outpacing the urbanization of the population As observed from the experience of other countries, urbanization is a process that occurs alongside marketization and industrialization, during which the dualistic social structure is transformed into a unitary one while the rural population moves to urban areas for non-agricultural production. In this process, their occupation, identity, and lifestyles undergo profound changes — from peasants to urban residents, and from rural life to urban life. While urbanization entails the synchronous transformation of both the population and land, in China, the urbanization of land has outpaced that of the population. In other words, much of the population remains agrarian although a large portion of land has been converted for urban land use. The discrepancy between the rates of land urbanization and population urbanization has posed a huge threat to China’s socioeconomic development. Due to the rapid expansion of the urban space, large areas of arable land are requisitioned DQGDVDUHVXOWDVXEVWDQWLDOQXPEHURIODQGOHVVSHDVDQWVDUHVXEMHFWWRGLIÀFXOWLHV in production and making a living. According to statistics, the built-up urban area of China totaled 22,439 km2 in 2000 and rose to 35,470 km2 in 2007, indicating an DYHUDJHDQQXDOJURZWKUDWHRI+RZHYHULWVWRWDOXUEDQSRSXODWLRQJUHZRQO\ at an annual rate of 3.7%, from 459.06 million to 593.79 million in the same period. Thus, the ratio of the growth rates of built-up areas to the growth rate of the urban population was 1.84:1. Rapid urban sprawl has resulted in 40 million to 50 million landless peasants, leading to such social problems as employment, social security, and land requisition compensation. ,Q WKH ÀIWK SRSXODWLRQ FHQVXV RI &KLQD PLJUDQW ZRUNHUV ZKR KDG OHIW WKHLU registered place of permanent residence for more than half a year, and yet had not been registered in places where they currently lived and work were regarded as urban residents. In addition, after the long craze of “upgrading counties into cities,” China went on to promote the policies of “upgrading counties into districts” and “upgrading (county-level) cities into district”. Therefore, statistically, the urban SRSXODWLRQKDVLQFUHDVHGVLJQLÀFDQWO\LQUHFHQW\HDUVVHH7DEOH  Nonetheless, it should be noted that such newly “urbanized” population is subject to the problem of “pseudo-urbanization.” Entitled to no permanent urban

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CHINA’S ECONOMY ISSUES 8

residence or urban public services, they are essentially no more than temporary residents who live and work within urban administrative areas. In reality, the rate of land urbanization still exceeds that of population urbanization. Table 1.8

The growth rates of built-up urban areas and the urban population of China

Year

Built-up urban area (km2)

Growth rate (%)

Total urban population (10,000)

Proportion of urban population (%)

Growth rate (%)

2000

22,439

4.2

45,906

36.1

4.9

2001

24,027

7.1

48,064

37.7

4.7

2002

25,973

8.1

50,212

39.1

4.5

2003

28,308

9.0

52,376

40.5

4.0

2004

30,406

7.4

54,283

41.8

3.6

2005

32,521

7.0

56,212

43.0

3.6

2006

33,660

3.5

57,706

43.5

2.7

2007

35,470

5.4

59,379

44.9

2.9

Source: China Statistical Yearbook, 2001–2008.

The landless peasants The reduction of rural land has given rise to the increase of landless peasants. In the last 10 years, the conversion of rural land for reasonable purposes in China has taken place at an annual rate of 4 million mu, among which peasant’s arable land accounts for about 2 million mu. This indicates that more than 1 million peasants may have lost their arable land every year. At present, the number of peasants who have lost all or part of their land is estimated to have reached up to 40 million to 50 million, constituting an extremely large social group in the country. The number of peasants who have lost all of their land and have no job has exceeded over 10 million by estimation, accounting for 20% of all landless peasants.15 A massive number of peasants were given non-agricultural status by an one-off compensation, becoming SDUWRIWKHXUEDQSRSXODWLRQ+RZHYHUGXHWRWKHLUODFNRIVNLOOVDQGNQRZOHGJH as well as the failure of rural collective enterprises in recent years, they are faced ZLWKJUHDWGLIÀFXOWLHVLQHPSOR\PHQW$VFRPPRQO\GHVFULEHGWKH\DUHUHGXFHGWR a state of having “no land to plough, no work to go to, and no minimum security to receive,” receiving far fewer public rights and services than other urban citizens. If urbanization continues to develop in this direction, the number of landless farmers

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Rural and Urban Development in China: Process, Problems, and Future Choices

will certainly increase against the decrease of per capita arable land, eventually shaking the foundation of China.

Employment and social security problems for farmers-turned-workers With the acceleration of urbanization, the scale of population movement will necessarily expand. Data from the 1% population sampling survey conducted in VKRZVWKDWDWPLGQLJKWRQ1RYHPEHUWKHÁRDWLQJSRSXODWLRQRI&KLQD was 147.35 million, which accounted for about 10% of the total population, and the FURVVSURYLQFLDOÁRDWLQJSRSXODWLRQUHDFKHGPLOOLRQ&RPSDUHGWRGDWDIURP WKH ÀIWK QDWLRQDO SRSXODWLRQ FHQVXV FRQGXFWHG LQ  WKH ÁRDWLQJ SRSXODWLRQ KDGLQFUHDVHGE\PLOOLRQZKLOHWKHFURVVSURYLQFLDOÁRDWLQJSRSXODWLRQ PLOOLRQ )URP WKH SHUVSHFWLYH RI VSDWLDO SDWWHUQV WKH ÁRDWLQJ SRSXODWLRQ PRYHV mostly from the central and western regions to developed areas in the eastern part of China in a large volume. Concerning the provincial distribution of the net SRSXODWLRQ ÁRZV *XDQJGRQJ =KHMLDQJ 6KDQJKDL -LDQJVX /LDRQLQJ %HLMLQJ Fujian, Xinjiang, and Tianjin are the top nine regions of in-migration, while Sichuan, +H·QDQ +X·QDQ -LDQJ[L$QKXL +XEHL *XDQJ[L *XL]KRX DQG 6KDDQ[L DUH WKH WRSQLQHUHJLRQVRIRXWPLJUDWLRQ7KHPDMRULW\RIWKHÁRDWLQJSRSXODWLRQLV engaged in labor work and businesses. It is obvious that large-scale cross-regional population movements have become an irreversible phenomenon during China’s socioeconomic transformation. This huge group has posed a challenge to the urban development of China. The prevalence of low income, the deprivation of basic public services and social VHFXULW\ WKH GLIÀFXOW\ LQ REWDLQLQJ SHUPDQHQW UHVLGHQFH DQG WKH PLJUDWRU\ nature of residence in urban areas have caused problems to the development of WUDQVSRUWDWLRQ LQIUDVWUXFWXUH LQ &KLQD $V WKH ÁRDWLQJ SRSXODWLRQ FRQWLQXHV WR grow, associated problems related to the education of children, housing, and social security, if unresolved, will hinder the healthy development of urbanization.

 

Resource and environmental constraints to the development of rural and urban areas Urban development requires a large supply of power, energy, and water, and the corresponding per capita water consumption, energy consumption, and waste production are much higher than those in rural areas. During the development of UXUDODQGXUEDQDUHDVLQ&KLQDWKHUHJLRQVSHFLÀFFRQVWUDLQWVRIZDWHUUHVRXUFHV energy, and the environment have become increasingly pressing. In some regions,

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CHINA’S ECONOMY ISSUES 8

resources for development have even reached the upper limit of carrying capacity. 7KLVZLOOOHDGWRWKHVDFULÀFHRIUXUDODUHDVLQIDYRURIXUEDQGHYHORSPHQWKHQFH resulting in resource and environmental constraints for rural and agricultural development.

Water constraints Most regions of China are now suffering from water shortage. China ranks 121 in the world in terms of available water resources, with the possession of water resources per capita being less than 2,300 cubic meters, about a quarter of the world’s average level. In fact, it has been listed as one of the 13 countries with water shortage. Statistics shows that among the 669 cities of China, 400 are suffering from the short supply of water, and 110 are subject to severe water shortage. Among the 32 super cities with a population of more than 1 million, 30 have been plagued by water shortage for a long time. 8QIRUWXQDWHO\PHDVXUHVWDNHQE\PRVWRIWKHVHFLWLHVLQÀJKWLQJDJDLQVWZDWHU shortage, such as groundwater extraction and the diversion of agricultural water, have been inappropriate. They have brought about three major problems. First, the over-extraction of groundwater has resulted in the large-scale drop of the water table and land subsidence. Second, the failure of sewage treatment in keeping pace with the sharp increase of water consumption means that sewage is unscrupulously discharged, leading to the contamination of rivers and groundwater. Third, the substantial development and utilization of surface water has resulted in the drying up of many rivers in the northern part of China. As a result of this, lots of large rivers have been turned into intermittent ones, bringing about a destructive impact on the river environment. In addition, the analysis made in the Water Supply and Demand of the 21st Century in China by the Ministry of Water Resources in 1999 shows that the gross demand for water by industry, agriculture, daily living, and the ecosystem in 2010 would be 698.8 billion m3, by a moderately dry year, while the gross water supply would be 667 billion m3, indicating a supply-demand gap of 31.8 billion m3. This indicates that China will enter into a period of severe water shortage after 2010. The peak of water shortage will emerge in 2030, during which the gap between the supply and demand of water will be 40 billion to 50 billion m3. The substantial population growth in urban areas during urbanization has resulted in a sharp increase of water consumption for daily living and industrial SXUSRVHV OHDGLQJ WR FRQÁLFWV EHWZHHQ UDSLG HFRQRPLF GHYHORSPHQW DQG ZDWHU resources. Some cities have blindly pursued large-scale development without considering the problem of water constraints, expecting the government to

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Rural and Urban Development in China: Process, Problems, and Future Choices

solve their immediate needs (including by such means as long-distance water WUDQVIHU 7KLVLVDRQHVLGHGPHDVXUHWKDWIRFXVHVVROHO\RQORFDOEHQHÀWVZLWKRXW considering the cost to the whole nation, which goes against the concept of VXVWDLQDEOH GHYHORSPHQW 8UEDQL]DWLRQ KDV EURXJKW D VLJQLÀFDQW H[SDQVLRQ in the size of impervious area (land surface covered with cement), leading to a sharp decline in the renewal of groundwater by rainfall. At the same time, surface runoff, and the pollution caused by it, is becoming increasingly serious. The rapid growth of sewage discharge during urbanization has also gravely destroyed the comprehensive function of the limited water body, and water pollution implicates pollution-induced water shortage.

Energy constraints Energy problems are also extremely acute in rural and urban areas. As in the case of water consumption, the annual increase of the urban population has drastically increased the consumption of all kinds of energy, including electricity, petroleum, fuel gas, and coal. Nationally, the per capita everyday life energy consumption increased from 126.4 kg of standard coal equivalent to 203.3 kg of standard coal equivalent during the period of 2000 to 2007 (see Table 1.9). Table 1.9

The everyday life energy consumption per capita of China

Everyday life energy per /LTXHÀHG Natural capita Coal Electricity .HURVHQH petroleum Coal gas Year gas (kg of (kg) (kWh) (kg) gas (m3) (m3) standard coal (kg) equivalent) 2000 2001 2002 2003 2004 2005 2006 2007

126.4 130.3 136.9 153.9 164.2 179.9 194.7 203.3

62.6 61.6 59.4 63.4 63.1 67.0 64.3 61.5

132.4 144.6 156.3 173.7 190.2 216.7 249.4 274.9

0.5 0.6 0.4 0.4 0.2 0.2 0.2 0.1

7.8 7.9 9.1 10.0 10.4 10.2 11.2 12.2

2.6 3.5 4.0 4.4 5.2 6.1 0.8 10.1

10.0 9.4 9.8 10.2 10.7 11.1 12.0 12.2

Source: China Statistical Yearbook, 2008.

7KHSHUFDSLWDFRQVXPSWLRQRIHOHFWULFLW\OLTXHÀHGSHWUROHXPJDVDQGQDWXUDO gas tends to increase, coal consumption has declined, while the consumption of

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CHINA’S ECONOMY ISSUES 8

coal gas also tends to increase in general. Simply considering petroleum, China has climbed to become the world’s second largest consumer as its cities and towns, especially large cities, enter into the age of the automobile. This tendency is now increasing. As one of the countries with the most rapid growth of the energy demand, China recorded double-digit growth rates of energy consumption during the period of 2003 to 2005, at 15%, 16%, and 11%, respectively. In 2006, the rate still stood as high as 9.6% despite the drop. In 2007, China’s gross energy consumption was 2.656 billion tons of standard coal equivalent, an increase of 7.8% over the previous year. In addition, the rise of international oil prices, the shortage of domestic oil and gas resources, and the backwardness of technology and equipment for energy production and transportation are all associated with issues of national energy security, which, due to the impact of rapid urbanization, have become increasingly epitomized by issues of urban energy security. Rural energy problems are mainly expressed in the shortage of rural power facilities, especially the weak power grids in the central and western regions of China, where approximately 20 million rural residents have no access to electricity. Some rural areas are still unable to enjoy the same power grids or electricity prices as urban areas.

The constraints of environmental problems Atmospheric pollution and water pollution have become increasingly serious amid urbanization. Noise pollution has affected people’s lives and health, so has extensive garbage disposal. Urban areas are suffering from severe atmospheric pollution. For a long time, China’s energy structure has favored coal, with coal consumption in urban areas accounting for over 60% of the total energy consumption. Since coal has a high composition of sulfur and ashes, the direct combustion of coal that has not been treated by desulfuration, and emissions from small stoves of urban households at a low altitude have created a lot of smoke, sulfur dioxide, and other pollutants, resulting in severe smoke-induced air pollution. Moreover, rapid urbanization is accompanied by the rapid growth of the driving population. By the end of 2007, the quantity of civilian vehicles in China had reached 43.58 million, 27.49 million more than that in 2000, indicating an increase of 1.71 times. There has been severe automobile emissions in some large and medium-sized cities. In 2007, the emission of sulfur dioxide reached 24.68 million tons, which exceeded the environmental capacity. In 2006, among the 524 cities participating in acid rain monitoring statistics WKURXJKRXW&KLQD H[SHULHQFHGDWOHDVWRQHDFLGUDLQDWWDFN  suffered an acid rain frequency of over 25%, and 87 (16.6%) more than 75%.

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Rural and Urban Development in China: Process, Problems, and Future Choices

Urban areas are facing large garbage disposal and serious water pollution. With an enlarging urban population and growing living standards, the disposal of urban garbage has been increasing dramatically. In 2007, the amount of domestic garbage clean-up was 152 million tons, among which only 62% was done through innocuous or harmless disposal. In addition, urban industrial and domestic sewages are producing water pollution. In 2007, the rate of sewage treatment in urban areas was merely 59%. The discharge of untreated, or inadequately treated, waste water and sewage into rivers and lakes have led to the deterioration of water quality, thus indirectly affecting the rural environment. The water problem is the most eminent problem of the rural environment. &XUUHQWO\ PHUHO\  RI WKH GULQNLQJ ZDWHU RI &KLQD·V YLOODJHV LV SXULÀHG E\ centralized treatment. Measured against safety indicators of drinking water, such as water quality, water volume, the comfort level of water utilization, and the water supply guarantee rate, the drinking water of over 300 million peasants fails to meet the safety standards. As a result of the long-term unavailability of safe drinking water, the health of peasants in rural areas, especially in the central and western regions of China, has been adversely affected. Moreover, rural areas are plagued by serious land pollution as a result of the heavy usage of fertilizers, insecticides, DQGDJULFXOWXUDOSODVWLFÀOPVDVZHOODFRDOÀUHZRRGDQGRWKHUXQFOHDQHQHUJLHV GRPLQDWHUXUDONLWFKHQV :KHUHDVÀUHZRRGFRQVWLWXWHVRIDOOFRRNLQJ energies, biogas, solar energy, and other clean energies make up only a meager 1%. The heavy use of unclean energies has posed a great threat to the ecological environment.

The Causes of Problems in Rural and Urban Development  

)LUVW WKHUH DUH VLJQLÀFDQW GLIIHUHQFHV LQ WKH HFRQRPLF DQG LQGXVWULDO VWUXFWXUHV of rural and urban areas. After the foundation of the PRC, China emphasized the development of heavy industries, and provided more policy support for the modern urban industrial sector. Accordingly, social resources, funds, and RWKHUJRRGVDQGPDWHULDOVÁRZHGWRDQGDFFXPXODWHGLQXUEDQDUHDVXQGHUWKH government’s mandatory plans. As a result, a dual structure of the development between rural and urban areas gradually came into being. A wide gap was opened between the development of rural and urban areas. In rural areas, agriculture still plays a dominant role. Compared to secondary and tertiary industries, its valueadding capacity and growth rate are much lower, so is its capacity for industrial H[SDQVLRQ 7KH VPDOO SURÀWV RI DJULFXOWXUH PDNH LW LPSRVVLEOH IRU IDUPHUV WR

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CHINA’S ECONOMY ISSUES 8

increase their income sharply and steadily, and the income gap between rural and urban residents has been expanding continuously. The second cause is the dual land system in rural and urban areas. The considerable difference in land prices between the two sectors, and the massive expansion of urban areas have caused a series of land-related problems, resulting in the irreversible reduction of the total arable land. For urban areas, revenues from inviting bids, auctions, and listing of land, as well as land transfer fees in recent \HDUVKDYHPDGHXSQHDUO\RQHWKLUGRIWKHDQQXDOÀVFDOUHYHQXHVWKXVEHFRPLQJ DQLPSRUWDQWGULYLQJIRUFHIRUXUEDQGHYHORSPHQW+RZHYHUWKHODQGOHVVSHDVDQWV are unable to become real urban residents due to the constraints of the household registration system. The land system has long stood between the economic development of rural and urban areas. The third factor lies in disparities in the capital factor between rural and urban areas. Since reform and opening up, household savings of both urban residents and UXUDOUHVLGHQWVLQ&KLQDKDYHEHHQULVLQJLQYDU\LQJGHJUHHV+RZHYHUWKHJURZWK rate of urban residents’ household savings has been much higher than that of rural residents, which has created a wide gap in the capital accumulation between rural and urban areas. As a result, rural areas, where development remains stagnant, have been suffering the shortage of capital, and caught in the vicious cycle of lowlevel development. 7KHIRXUWKUXUDOXUEDQGLYLGHLVIRXQGLQWKHHIÀFLHQF\RIXWLOL]LQJSURGXFWLRQ factors. The limited development of secondary and tertiary industries and scarce WHFKQLFDO FDSDFLW\ RI LQGXVWULDO HQWHUSULVHV LQ UXUDO DUHDV KDYH OHG WR GLIÀFXOWLHV in accumulation in rural areas, which has inhibited the expansion of production VFDOHDQGWHFKQRORJLFDOLQYHVWPHQW'XHWRWKHUHVWULFWLYHPHFKDQLVPVRIWKHÁRZV of production factors between rural and urban areas and industrial interactions, WKH XWLOL]DWLRQ RI SURGXFWLRQ IDFWRUV KDV EHHQ LQHIÀFLHQW LQ UXUDO DUHDV XQGHU LPEDODQFHGUHVRXUFHDOORFDWLRQ7KXVLWKDVEHHQGLIÀFXOWIRUUXUDODUHDVWRVHHN economic improvement.

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Chapter Comprehensive Evaluation of the Levels of Rural-­ Urban Coordinated Development

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The correct measurement of differences in the levels of coordinated rural-urban development in different regions is not only the precondition for the coordination of the relationship and narrowing of the gap between rural and urban areas, but also the basis for various regions to select rational models and formulate optimized strategies for the coordinated rural-urban development. We use an econometric PRGHOWRHYDOXDWHWKHRYHUDOOVLWXDWLRQDQGWKHVSHFLÀFVLWXDWLRQVRISURYLQFHVDQG regions.

The Construction of the Comprehensive Evaluation Index System for China’s Rural-Urban Coordinated Development From the perspective of dynamic analysis, we have made an in-depth analysis on the regional differences in the coordinated development of rural and urban areas over the past decades by constructing a system of evaluation indexes. We used the Theil index to perform regional analysis on the differences and tendency of variations in the coordinated rural-urban development of various regions, with the purpose of enabling them to understand their own situations in the national context. On this basis, we have formulated optimized strategies for promoting the coordinated development of rural and urban areas.

Principles for the construction of the index system 6FLHQWLÀFEDVLV 7KHLQGH[V\VWHPVKRXOGEHHVWDEOLVKHGRQDVFLHQWLÀFEDVLVZLWKWKHFDSDFLW\IRU PHDVXULQJDQGUHÁHFWLQJWKHGHJUHHRIDFKLHYHPHQWWHQGHQF\RIGHYHORSPHQWDQG GHYHORSPHQWDO SRWHQWLDO RI FRRUGLQDWHG UXUDOXUEDQ GHYHORSPHQW VFLHQWLÀFDOO\ objectively, and realistically, so as to ensure the progress of its implementation in a correct direction.

+LHUDUFK\ Coordinated rural-urban development is an open and complex system composed of a number of subsystems. Since the index system is established to provide information for decision-making to governments of all levels, which will each regulate and manage the solutions within their jurisdictions, different indexes should be used for governments of various levels. 36 CE_CH2.indd 36

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

&RPSUHKHQVLYHQHVVDQGVLPSOLFLW\ $VFLHQWLÀFV\VWHPRIHYDOXDWLRQLQGH[HVFDQLQWHJUDWHVHOHFWHGLQGH[HVIRUUHÁHFWLQJ and measuring the status of operation and characteristics of coordinated ruralurban development at all levels and from various perspectives. However, the index system should be comprehensive instead of all-embracing. Concise and explicit indexes should be used for the convenience of computation and processing.

'\QDPLVP As coordinated rural-urban development is a dynamic process, long-term dynamic evaluations can be only achieved through descriptions using dynamic indexes. For this reason, it is essential to ensure that selected indexes are diverse, threedimensional, and complex while being comparable and practical.

,QWHJUDWLRQRIVSDWLDOLW\DQGWHPSRUDOLW\ Coordinated rural-urban development is a spatial-temporal concept and a continuous process that occurs within a certain period of time and in a certain region. However, by establishing a system of evaluation indexes, we can unify space and time. Therefore, it is essential to consider thoroughly the imbalanced and multilevel states of socioeconomic development in various regions.

The construction of the index system Based on the above principles, and considering the actual practice and common traits of coordinated rural-urban development, we have selected the levels of spatial association, economic association, social and cultural association, and rural-urban coordinated development as primary indexes. In addition, over 40 secondary indexes, including the level of urbanization level, urban density, and the density of railway and highway networks, have been used to form a comprehensive evaluation index system to measure the state of coordinated ruralurban development in various regions. The covariance matrix of random variables has been used to transform the mentioned index group so as to eliminate linear relationships among different indexes as well as to perform screening and dimension reduction. After screening, the index system only contains 26 secondary indexes.

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Table 2.1

Primary index

Level of spatial association (0.3967)

Level of economic association (0.3967)

The comprehensive evaluation index system for the levels of rural-urban coordinated development Secondary index

Connotations and method of calculation

Level of urbanization (%) (0.0163)

(Total population – Rural population) / Total population x 100%

Urban density (number of cities per 10,000km2) (0.0264)

Number of cities / Land area of region

Density of small towns (number of towns per 10,000km2) (0.0264)

Number of small towns / Land area of region

Density of railway networks (km / 10,000km2) (0.0497)

Railway mileage / Land area of region

Density of highway networks (km / 10,000km2) (0.0831)

Highway mileage / Land area of region

Density of postal routes (km/10,000km2) (0.0352)

Length of postal routes / Land area of region

Degree of transportation convenience (0.1259)

Length of regional transportation network per unit area x 100 x Regional freight volume / Regional freight turnover

Comparative index of levels of informatization of rural and urban areas (%) (0.0339)

Number of telephone sets per hundred rural households / Number of telephone sets per hundred urban households x 100%

Proportion of nonagricultural GDP (0.0401)

Non-agricultural GDP / GDP x 100%

Proportion of nonagricultural social labor force (%) (0.0636)

Non-agricultural social labor force / Total social labor force x 100%

Proportion of nonagricultural workers in rural areas (%) (0.0741)

Number of workers engaged in nonagricultural jobs in rural areas/ Number of workers in rural areas x 100%

External orientation of the economy (%) (0.0199)

(Total import and export value / GDP x 0.5 + Foreign direct investment / GDP x 0.5) x 100%

Output value per laborer of TVEs (RMB / person) (%) (0.1323)

Value-added of TVEs / Number of workers in TVEs

Index of dualistic structure of the region (0.0667)

Proportion of output value of primary industries of region x Proportion of labor force of primary industries of region Proportion of output value of non-primary industries of region x Proportion of labor force of non-primary industries of region

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

(Cont’d) Primary index

Level of social and cultural association (0.1164)

Level of rural-urban coordinated development (0.0902)

Note:

Secondary index

Connotations and method of calculation

3URSRUWLRQRIÁRDWLQJ population (%) (0.0126)

Floating population / Local population x 100%

Cultural level of population (0.0385)

Population with college or higher education per 10,000 persons / Number of illiterates and semi-literates per 10,000 persons

Quantity of newspaper published (100 million copies) (0.0748)

—

Per capita educational expenditure (RMB / person) (0.0368)

Educational expenditure / Total regional population

Per capita health service expenditure (RMB / person) (0.0211)

Health service expenditure / Total regional population

Comparative index of (QJHO·VFRHIÀFLHQWVRIUXUDO and urban areas (0.0047)

(QJHO·VFRHIÀFLHQWRIXUEDQDUHDV (QJHO·VFRHIÀFLHQWRIUXUDODUHDV

*LQLFRHIÀFLHQW

1.067 – 20.22(1/A) – 0.89LnA, where A indicates per capita GDP

'XDOFRQWUDVWFRHIÀFLHQW of comparative labor productivity (0.0117)

(Proportion of GDP of primary industries / Proportion of workers in primary industries) / (Proportion of GDP of non-primary industries / Proportion of workers of non-primary industries)

&RHIÀFLHQWRIELDVHG investment in elementary education (0.0115)

Investment in elementary education in urban areas / Investment in elementary education in rural areas

Relative proportion of ÀQDQFLDOVXSSRUWIRU agriculture (%) (0.0309)

3URSRUWLRQRIÀQDQFLDOVXSSRUWIRU agriculture in region / Proportion of output value of primary industries in region

Comparative index of consumption levels of rural and urban areas (0.0045)

Consumption level of urban residents / Consumption level of rural residents

Comparative index of income levels of rural and urban areas (%) (0.0222)

Annual per capita net income of rural residents / Annual per capita disposable income of urban residents x 100%

Numbers in parentheses represent the weights determined by the AHP method. Hierarchy consistency index: CI = 0.0488; random consistency index: RI = 2.2007; consistency ratio: CR CI / RI 0.0222 < 0.1. The consistency test was passed.

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6SHFLÀFDOO\WKHFRPSUHKHQVLYHHYDOXDWLRQLQGH[V\VWHPDVFRQVWUXFWHGLQ7DEOH 2.1 includes the following elements: First, the levels of spatial association of rural and urban areas are the direct GHWHUPLQDQW RI WKH SRVVLELOLW\ RI WKH WZRZD\ ÁRZV DQG RSWLPDO DOORFDWLRQ RI rural and urban elements. Indexes for measuring the levels of spatial association mainly include the urban systems and infrastructural construction. The degree of perfection of urban systems is mainly expressed by the level of urbanization, urban density, and the density of small towns. A perfect urban network is an effective facilitator of the improvement of rural and urban spatial connection. Infrastructure, as a channel of connecting rural and urban areas, can both promote and hinder WKHIRUPDWLRQDQGLPSDFWRIWKHÁRZVRIYDULRXVIDFWRUVDQGLWFDQEHPHDVXUHG through the density of railway networks, highway networks, postal routes; the degree of transportation convenience; and the comparative index of the levels of informatization between rural and urban areas. The levels of spatial association in rural and urban areas provide the basis for coordinated rural-urban development. Second, the levels of economic association are the principal manifestation of the state of coordinated rural-urban development. The levels of rural and urban HFRQRPLFDVVRFLDWLRQDUHPDLQO\PHDVXUHGWKURXJKLQGH[HVWKDWUHÁHFWWKHÁRZV of resources, funds, population, and information between rural and urban areas, for example, the proportions of non-agricultural GDP, non-agricultural social labor force, and non-agricultural workers in rural areas; the external orientation of the economy, and the index of dualistic structure of the region. Third, in addition to economic relationships, there also exists social and cultural relationships between rural and urban areas. During the construction of the New Socialist Countryside and a harmonious society, coordinating the social and cultural relationships between rural and urban areas is also an effective way to promote coordinated rural-urban development. The levels of rural and urban social and cultural association can be measured through the cultural level of the population, quantity of newspapers published, per capita educational expenditure, per capita KHDOWKVHUYLFHH[SHQGLWXUHDQGWKHSURSRUWLRQRIWKHÁRDWLQJSRSXODWLRQ Fourth, the levels of rural-urban coordination are the direct manifestation of coordinated rural-urban development. They are characterized by a big gap between rural and urban areas. Generally, the narrower the gap between rural and urban areas, the higher the level of coordination. This item is mainly measured through comparative indexes, including the comparative index of the Engel’s FRHIÀFLHQWV RI UXUDO DQG XUEDQ DUHDV WKH *LQL FRHIÀFLHQW WKH GXDO FRQWUDVW FRHIÀFLHQWRIFRPSDUDWLYHODERUSURGXFWLYLW\WKHFRHIÀFLHQWRIELDVHGLQYHVWPHQWLQ HOHPHQWDU\HGXFDWLRQWKHUHODWLYHSURSRUWLRQRIÀQDQFLDOVXSSRUWIRUDJULFXOWXUH

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

the comparative index of the consumption levels of rural and urban areas, and the comparative index of the income levels of rural and urban areas.

The identification and quantification of indexes Some of the above indexes can be directly obtained from available sources, while RWKHUVKDYHWREHFRPSXWHGXVLQJDVSHFLÀFIRUPXOD7KH\DUHH[SODLQHGLQGHWDLO below:

7KHH[WHUQDORULHQWDWLRQRIWKHHFRQRP\ The external orientation of the economy refers to the extent to which the regional economy is involved in the international economy, i.e. the degree of dependence of the regional economy on the international economy. With the rapid globalization of the world economy and increasing regional economic integration, export-oriented economic development has been considered as one of the important factors and driving forces for the regional integration of rural and urban areas. In the past, the external orientation of the economy was usually measured based on the proportion of the value of import and export in GDP. However, with the remarkable increase of foreign capital utilized by China, we have also considered the factors of foreign trade and foreign capital. The method of calculation is as follows:

  External orientation of the economy =

Total import and export value GDP

x 0.5 +

Foreign direct investment GDP

x 0.5 x 100% (2-1)

7KHGHJUHHRIWUDQVSRUWDWLRQFRQYHQLHQFH It is obvious that the more convenient the options of transportation, the smoother the transportation network, and hence easier the promotion of coordinated ruralurban development. Transportation convenience considers the density of the WUDQVSRUWDWLRQQHWZRUNDQGWKHHIÀFLHQF\RIXWLOL]LQJLW,WVFDOFXODWLRQLVEDVHGRQ the following formula:

    Transportation convenience =

Length of regional transportation network per unit area x 100 x Regional freight volume Regional freight turnover

(2-2)

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7KHFRPSDUDWLYHLQGH[RIWKHOHYHOVRILQIRUPDWL]DWLRQRIUXUDODQG XUEDQDUHDV Under the background of economic and social informatization, information exchange and communication play increasingly important roles in socioeconomic development. Comparing the use of the telephone, a basic tool for information FRPPXQLFDWLRQ LQ PRGHUQ WLPHV EHWZHHQ UXUDO DQG XUEDQ DUHDV FDQ UHÁHFW WKH rural-urban gap in informatization. The formula is as follows:

Comparative index of informatization = of urban and rural areas

Number of telephone sets per hundred rural households Number of telephone sets per hundred urban households

x 100%

(2-3)

7KHLQGH[RIGXDOLVWLFVWUXFWXUHRIWKHUHJLRQ :KHWKHUDGXDOLVWLFVWUXFWXUHLVLGHQWLÀHGLQWKHHFRQRP\DQGVRFLHW\RIDUHJLRQLV DQLPSRUWDQWIDFWRUWKDWLQÁXHQFHVUHJLRQDOUXUDOXUEDQLQWHJUDWLRQ$KLJKYDOXH of the index indicates a wide gap between the traditional and modern sectors, as well as between rural and urban areas. In this case, the dualistic structure will IXUWKHUGHYHORSDQGHYHQEHLQWHQVLÀHGZKLFKJRHVDJDLQVWWKHJRDORIFRRUGLQDWHG rural-urban development. To accelerate rural and urban integration, it is essential to eliminate this dualistic structure. The formula for calculation is:

Index of dualistic structure = of the region

Proportion of output value of primary industries of region x Proportion of labor force of primary industries of region Proportion of output value of non-primary industries of region x Proportion of labor force of non-primary industries of region

(2–4)

7KHFXOWXUDOOHYHORIWKHSRSXODWLRQ The higher the cultural level of the population, the more advanced a society in terms of openness and skilled workers, which is favorable to the elimination of the rural-urban divide. The improvement of the cultural level of the regional, especially rural population is one of the policy focuses in the promotion of coordinated ruralurban development. The following formula is used to measure the cultural level of the population:

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

 Cultural level of population =

Population with college or higher education per 10,000 persons Number of illiterates and semi-literates per 10,000 persons

       (2–5)

7KH*LQLFRHIÀFLHQW 7KH*LQLFRHIÀFLHQWPDLQO\UHÁHFWVZKHWKHULQFRPHGLVWULEXWLRQLVHTXLWDEOH7KHUH is a great gap of income distribution between the rural and urban areas of China. 7KH LQWURGXFWLRQ RI WKLV LQYHUVH LQGH[ UHÁHFWV WKLV JDS WR VRPH H[WHQW 7KH *LQL FRHIÀFLHQWLVFDOFXODWHGZLWKWKHHPSLULFDOHTXDWLRQ *LQLFRHIÀFLHQW ï$ ï/Q$

²

In the formula, “A” stands for per capita GDP.

7KHFRPSDUDWLYHLQGH[RI(QJHO·VFRHIÀFLHQWVRIUXUDODQGXUEDQDUHDV 7KH (QJHO·V FRHIÀFLHQW UHÁHFWV WKH SURSRUWLRQ RI IRRG FRQVXPSWLRQ H[SHQGLWXUH WR UHVLGHQWV· LQFRPH 7KH KLJKHU WKH (QJHO·V FRHIÀFLHQW WKH ORZHU WKH OLYLQJ VWDQGDUGV $W SUHVHQW WKH (QJHO·V FRHIÀFLHQW RI XUEDQ &KLQD LV UHODWLYHO\ ORZ LQGLFDWLQJ VLJQLÀFDQW LPSURYHPHQW LQ WKH OLYLQJ VWDQGDUGV$ FRPSDULVRQ RI WKH (QJHO·VFRHIÀFLHQWRIUXUDODQGXUEDQDUHDVFDQUHYHDOWKHJDSRIOLYLQJVWDQGDUGV between them. The larger the comparative index, the narrower the gap, and the higher the degree of integration. The formula for calculation is given below: Comparative index of Engel’s = FRHIÀFLHQWVRIXUEDQDQGUXUDODUHDV

(QJHO·VFRHIÀFLHQWRIXUEDQDUHDV (QJHO·VFRHIÀFLHQWRIUXUDODUHDV

(2–7)

7KHGXDOFRQWUDVWFRHIÀFLHQWRIFRPSDUDWLYHODERUSURGXFWLYLW\ 7KH GXDO FRQWUDVW FRHIÀFLHQW RI FRPSDUDWLYH ODERU SURGXFWLYLW\ FDQ UHÁHFW WKH differences in the levels of development of the industrial and agricultural sectors. The larger its value, the narrower the industrial gap between rural and urban areas, and the higher the level of coordinated economic development. Here is the formula for calculation: Comparative agricultural labor productivity 'XDOFRQWUDVWFRHIÀFLHQWRI = comparative labor productivity Comparative non-agricultural labor productivity Proportion of GDP of primary industries Proportion of workers in primary industries = Proportion of GDP of non-primary industries Proportion of workers in non-primary industries

 (2–8)

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7KHUHODWLYHSURSRUWLRQRIÀQDQFLDOVXSSRUWIRUDJULFXOWXUH 7KHUHODWLYHSURSRUWLRQRIÀQDQFLDOVXSSRUWIRUDJULFXOWXUHUHÁHFWVWKHGHJUHHRI UHJLRQDO ÀQDQFLDO VXSSRUW IRU DJULFXOWXUH 7KHODUJHU WKH YDOXH RIWKLV LQGH[ WKH stronger the support of urban areas for rural areas, and hence the higher the level of coordinated rural-urban development. In view of the differences in the levels of agricultural development between regions, to measure this index in a more DFFXUDWHPDQQHUZHKDYHFDOFXODWHGLWXVLQJWKHSURSRUWLRQRIÀQDQFLDOVXSSRUW for agriculture over the output of primary industries in a region: 5HODWLYHSURSRUWLRQRIÀQDQFLDO = support for agriculture

3URSRUWLRQRIÀQDQFLDOVXSSRUW for agriculture in the region

(2–9)

Proportion of the output value of primary industries in the region

7KHFRHIÀFLHQWRIELDVHGLQYHVWPHQWLQHOHPHQWDU\HGXFDWLRQ 7KH FRHIÀFLHQW RI ELDVHG LQYHVWPHQW LQ HOHPHQWDU\ HGXFDWLRQ LV GHYHORSHG WR express the gap in the developments of elementary education between rural and urban areas. The smaller this index, the narrower the gap, and the higher the level of coordinated rural-urban development. The following formula has been adopted: &RHIÀFLHQWRIELDVHGLQYHVWPHQW = in elementary education

Investment in elementary education in urban areas Investment in elementary education in rural areas

(2–10)

Comprehensive Evaluation of the Levels of RuralUrban Coordinated Development in All China Evaluation methods and calculation results The method of multi-index comprehensive evaluation has been performed using various methods. The method of linear weighting has been used for the calculation of the levels of rural-urban coordinated development of various provincial areas in China based on the following calculation formula: n

  P = ƺ Fi  Wi i=1

(2–11)

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P refers to the comprehensive index of the level of rural-urban coordinated development of a provincial area, and we name it the “degree of rural-urban coordinated development.” Wi represents the weight of the ith index of this provincial area, while Fi is the dimensionless value of the ith index of this provincial area. The results of the comprehensive evaluation of the levels of rural-urban coordinated development in various Chinese provinces during the period of 1997 to 2007 using the explained indexes and method of evaluation based on relevant statistics are as shown in Table 2.2. Table 2.2

Changes in the scores and ranks of Chinese provincial regions with regard to the degree of rural-urban coordinated development during the period of 1997 to 2007 Rank in 1997

Rank in Rank in 2004 2007

Region

1997

2000

2004

2006

2007

Beijing

81.91

86.91

91.61

86.77

80.13

2

1

2

Tianjin

55.70.

57.65

65.92

62.91

60.28

3

3

5

Heibei Province

33.38

33.81

38.40

40.61

43.83

11

13

12

Shanxi Province

39.21

40.60

45.92

50.91

53.04

8

7

8

Inner Mongolia

19.10

18.41

22.95

22.90

23.53

26

28

24

Liaoning Province

42.56

41.14

45.17

48.61

47.86

6

8

9

Jilin Province

27.41

26.98

34.68

33.42

34.32

17

18

17

Heilongjiang Province

27.71

26.16

31.45

32.16

30.48

16

21

19

Shanghai

82.07

62.11

76.13

81.55

82.45

1

2

1

Jiangsu Province

42.27

42.74

61.38

67.04

64.79

7

4

3

Zhejiang Province

44.13

47.16

56.74

61.89

60.58

5

5

Anhui Province

25.64

26.64

39.28

38.06

37.98

19

12

15

Fujian Province

36.97

38.40

43.14

39.45

39.51

9

10

14

Jiangxi Province

27.75

28.11

36.86

34.70

35.65

15

14

16

Shandong Province

36.67

35.26

44.71

54.98

57.13

10

9

6

Henan Province

28.15

17.74

34.78

44.05

45.84

14

17

11

Hubei Province

30.48

32.92

40.54

39.95

40.41

12

11

13

Hunan Province

25.35

25.78

34.81

34.72

34.24

21

16

18

Guangdong Province

50.81

45.51

51.17

54.46

54.61

4

6

7

4

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(Cont’d) Region

1997

2000

2004

2006

2007

Rank in 1997

Rank in Rank in 2004 2007

Guangxi Province

20.01

22.45

26.74

20.33

19.35

25

25

27

Hainan Province

25.48

26.93

34.12

16.93

18.71

20

19

28

Chongqing

28.33

32.70

36.48

47.37

45.92

13

15

10

Sichuan Province

21.12

22.18

29.97

29.16

30.45

24

24

20

Guizhou Province

15.52

17.62

26.03

23.26

24.25

28

26

23

Yunnan Province

21.55

23.26

30.24

21.91

22.52

23

23

25

Tibet

5.66

7.31

18.08

10.36

11.36

31

31

31

Shaanxi Province

25.75

24.86

30.87

29.20

29.09

18

22

21

Gansu Province

18.80

18.23

21.02

19.34

18.58

27

30

29

Qinghai Province

14.60

15.65

23.66

18.44

19.83

29

27

26

Ningxia Hui Autonomous Region

25.05

24.29

33.76

26.06

28.83

22

20

22

Xinjiang Uygur Autonomous Region

14.59

14.94

22.04

14.32

16.05

30

29

30

Eastern region

48.94

47.65

56.33

56.66

60.37

—

—

—

Central region

29.43

30.30

38.70

40.40

38.83

—

—

—

Western region

19.17

20.16

26.82

24.39

24.15

—

—

—

Northeast region

32.56

31.43

37.10

38.06

41.09

—

—

—

The whole country

32.06

32.08

39.63

38.90

39.08

—

—

—

Note:

The eastern region covers Beijing, Tianjin, Hebei Province, Shandong Province, Shanghai, Jiangsu Province, Zhejiang Province, Fujian Province, Guangdong Province, and Hainan Province. The central region covers Shanxi Province, Anhui Province, Jiangxi Province, Henan Province, Hubei Province, and Hunan Province. The northeastern region covers Liaoning Province, Jilin Province, and Heilongjiang Province. The rest belong to the western region. Since Chongqing became a municipality directly under the Central Government in 1997, the investigation of its rank changed thereafter. Sources: China Statistical Yearbook ï Provincial Statistical Bulletins, ï; China Rural Statistical Yearbook, 2007; China Agriculture Yearbook, 2007; and China’s Education Funds Statistical Yearbookï

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

2YHUDOOMXGJPHQW During the period of 1995 to 2005, the average level of coordinated rural-urban development increased by a small degree on the whole, showing no more than gentle changes. During the past 10 years, the overall score has merely been increased by 10.01 points, meaning a small annual increase of 1 point on average (see Table 2.3). Table 2.3

The levels of rural-urban coordinated development in China during the period of 1995 to 2007

Item

1995

1996

1997

1998

1999

2000

2001

Degree of rural-urban coordinated development

29.62

30.41

32.06

32.05

31.17

32.08

33.73

&RHIÀFLHQWRIYDULDWLRQRIUXUDO urban development

0.37

0.40

0.41

0.40

0.38

0.36

0.34

Item

2002

2003

2004

2005

2006

2007

Degree of rural-urban coordinated development

34.64

37.97

39.63

39.63

—

—

0.32

0.31

0.31

0.31

0.31

0.30

&RHIÀFLHQWRIYDULDWLRQRIUXUDO urban development 1RWH

7KHFRHIÀFLHQWRIYDULDWLRQRIUXUDOXUEDQGHYHORSPHQW 5XUDOUHVLGHQWV·LQFRPH / Urban residents’ income.

The degree of rural-urban coordinated development is a comprehensive index of measurement that falls between 0 and 100. The closer this index is to 100, the more coordinated the development between rural and urban areas, and vice versa. 7KH FRHIÀFLHQW RI YDULDWLRQ RI UXUDOXUEDQ GHYHORSPHQW LV D VLQJOHLWHP LQGH[ that falls between 0 and 1. The closer this index is to 1, the more coordinated the development between rural and urban areas, and vice versa. With respect to the degree of rural-urban coordinated development during the SHULRGRIWRDQDVFHQGDQWVWDEOHWUHQGLVLGHQWLÀHG'XULQJWKHSHULRG of 2003 to 2005, this value changed steadily within the range between 37 and 40. With respect to the degree of rural-urban coordinated development during the period of 1995 to 2007, it increased rapidly and then decreased gradually, tending toward steady development. It should be particularly noted that since 2003, the level of rural-urban coordinated development has become basically stable with H[WUHPHO\PLQRUFKDQJHV'XULQJWKLVSHULRGWKHFRHIÀFLHQWRIYDULDWLRQRIUXUDO urban development was maintained at 0.31 and slightly decreased to 0.30 in 2007.

47 CE_CH2.indd 47

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CHINA’S ECONOMY ISSUES 8

Opposite trends between the two indexes have been observed in certain periods during the past 10 years. We interpret this in the following way: It is true WKDW WKH FRHIÀFLHQW RI YDULDWLRQ RI UXUDOXUEDQ GHYHORSPHQW UHÁHFWLQJ LQFRPH levels indicates a widening rural-urban income gap. However, due to the fact that government investment in rural areas over the past decade has increased VLJQLÀFDQWO\XQFRRUGLQDWHGUXUDOXUEDQGHYHORSPHQWKDVEHHQDOOHYLDWHGWRVRPH extent. It should be particularly noted that, since the 17th National Congress of the CPC, the Central Government has been placing great stress on the equalization of fundamental public services, which has brought remarkable effects to the moderation of uncoordinated rural-urban development. This tendency is associated with the close attention given by the Central *RYHUQPHQW WR WKH 7KUHH 5XUDO ,VVXHV VLQFH  7KH VWDEOLQJ FRHIÀFLHQW RI variation of rural-urban development during the period of 2003 to 2007 indicates that incoordination was gradually moving toward coordination.

5HJLRQDOMXGJPHQW From the perspective of provinces and regions, the scores of the eastern region GLGQRWFKDQJHVLJQLÀFDQWO\DQGGHFUHDVHGVOLJKWO\GXULQJWKHSHULRGRIWR 1999, but it rose sharply during the period of 1999 to 2004. The score of the central region presented a trend of steady rise during the period of 1995 to 2004, while that of the northeastern region was maintained at a relatively stable level during the period of 1995 to 2002, but showed an upward trend afterwards. Similar to that of the central region, the score of the western region showed a trend of a steady rise over the past decade. In short, a rising trend is observed in all four regions. Moreover, the tendency of accelerating growth rates since 1999 was closely related to the implementation of western region development program and strategy of coordinated regional development after 1999. During the period of 2004 to 2007, all regions demonstrated a trend of steady changes. Table 2.4 

Trends of coordinated rural-urban development in all China and VSHFLÀFUHJLRQVRIWKHFRXQWU\GXULQJWKHSHULRGRIWR

Region

All China

Eastern region

Northeastern region

Central region

Western region

Trend

Gentle with slight rise

Sharp rise

Stable with slight rise

Steady with very slight rise

Steady with very slight rise

48 CE_CH2.indd 48

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

7KH FRHIÀFLHQWV RI YDULDWLRQ RI UXUDOXUEDQ GHYHORSPHQW VKRZHG D EDVLFDOO\ stable trend of rural-urban coordinated development during the period of 2005 to 2007 in all regions. A small difference rests in the fact that while steady, slight decrease was observed in the eastern, central, and northeastern regions, the development of the western region continued to remain level (see Tables 2.5 and 2.6). 7DEOH

7KHUHJLRQDOFRHIÀFLHQWVRIYDULDWLRQRIUXUDOXUEDQGHYHORSPHQW in China during the period of 2005 to 2007

Year

All China

Eastern region

Central region

Western region

Northeastern region

2005

0.31

0.35

0.34

0.27

0.39

2006

0.31

0.35

0.33

0.27

0.38

2007

0.30

0.34

0.33

0.27

0.38

1RWH

7KHFRHIÀFLHQWRIYDULDWLRQRIUXUDOXUEDQGHYHORSPHQW 5XUDOUHVLGHQWV·LQFRPH / Urban residents’ income.

Table 2.6 

Trends of coordinated rural-urban development in all China and VSHFLÀFUHJLRQVRIWKHFRXQWU\GXULQJWKHSHULRGRIWR

Region

All China

The eastern region

The northeastern region

The central region

The western region

Trend

Stable with slight decrease

Stable with slight decrease

Stable with slight decrease

Stable with slight decrease

Stable

1RWH

7UHQGVKDYHEHHQGHGXFHGIURPWKHUHJLRQDOFRHIÀFLHQWVRIYDULDWLRQRIUXUDOXUEDQ development.

(YROXWLRQVRISDWWHUQV Although rural-urban coordinated development of various regions has been VLJQLÀFDQWO\ LPSURYHG GXULQJ WKH SDVW GHFDGH WKH LQWHUUHJLRQDO SDWWHUQ RI GHYHORSPHQW KDV QRW FKDQJHG VLJQLÀFDQWO\ DQG VLJQLÀFDQW JDSV VWLOO H[LVW ,Q 2004, scores for all China, the eastern region, central region, western region, and northeastern region were 39.63, 56.33, 38.70, 26.82, and 37.10, respectively. Only the score of the eastern region was higher than the national average, with all others falling below it. Similar to the spatial pattern of economic development, the levels of rural-urban coordinated development go from high to low in the sequence of the eastern region, 49 CE_CH2.indd 49

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CHINA’S ECONOMY ISSUES 8

the central region, the northeastern region, and the western region, indicating that coordinated rural-urban development is highly consistent with regional economic development. This shows that to improve coordinated rural-urban development, efforts must be made in improving regional economic development. Looking at the average scores of the four regions, the level of coordinated development in the eastern region has been far higher than in other regions. The level of development of the northeastern region is higher than that of the central and western regions, with the central region slightly faring better than its western counterpart. Focusing on the scores of the provinces located in the four regions, Beijing and Shanghai scored much higher than all provinces in the eastern region, with Hainan and Hebei Provinces earning lower scores that were still equivalent to the average of the central region. Liaoning Province in the northeastern region obtained a higher score than Heilongjiang and Jilin Provinces. Six provinces in the central region had similar scores, with Hubei and Jiangxi Provinces being slightly DKHDG$VLJQLÀFDQWJDSLVDOVRREVHUYHGEHWZHHQSURYLQFHVUHJLRQV LQWKHZHVWHUQ region. The scores of Shaanxi Province and Ningxia Hui Autonomous Region were higher than the average level of the central region, while Yunnan Province, Tibet, and Gansu Province had the lowest scores of the whole country. During the period of 2005 to 2007, coordinated rural-urban development in all China as well as its major regions presented a basically stable tendency, with stable SDWWHUQVRILQWHUUHJLRQDOGHYHORSPHQW+RZHYHUWKHUHZDVVWLOODVLJQLÀFDQWJDS RIGHYHORSPHQW,QWKHFRHIÀFLHQWRIYDULDWLRQRIUXUDOXUEDQGHYHORSPHQWRI the whole country was 0.30, the eastern region was 0.34, the central region was 0.33, the western region was 0.27, and the northeastern region was 0.38. The northeastern UHJLRQKDGWKHKLJKHVWYDOXHZKHUHDVWKHZHVWHUQUHJLRQWKHORZHVW7KHFRHIÀFLHQWV RI WKH HDVWHUQ DQG FHQWUDO UHJLRQV ZHUH VLPLODU DQG GLG QRW VLJQLÀFDQWO\ GLIIHU from the national level. The levels of rural-urban coordinated development of the eastern, central, and western regions were basically consistent with the spatial patterns of economic development. This is because since 2003, when China put IRUZDUGLWVVFLHQWLÀFRXWORRNRIGHYHORSPHQWGHPDQGHGWKHRYHUDOOSODQQLQJIRU regional, rural and urban development for the acceleration of the construction of WKH1HZ6RFLDOLVW&RXQWU\VLGHDQGLQWURGXFHGSROLFLHVWKDWEHQHÀWWHGSHDVDQWV peasants’ income has increased by a large margin. The widening of the rural-urban divide started to slow down, and rural-urban coordinated development began to stabilize. However, the gap of coordinated development among regions is still VLJQLÀFDQW$OWKRXJKHFRQRPLFGHYHORSPHQWRIWKHZHVWHUQUHJLRQKDVVSHGXS it depends largely on the impetus of investments in infrastructural construction. In addition, the western region still falls far behind the eastern region in terms of

50 CE_CH2.indd 50

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

the capacity for economic development. Industry and urban areas are still weak as driving forces for agricultural and rural development. The existence of such inter- and intra- regional gaps in rural-urban coordinated development calls for improvement of economic development, the spatial association of rural and urban areas, and the elevation of the quality of the population in the central and western regions. They need to learn from the experience of the eastern region. Moreover, the problem of internal differences in rural-urban coordinated development should be noted by all regions, especially the eastern region.

Analysis of regional differences in rural-urban coordinated development To enable further understanding of the differences in the levels of rural-urban coordinated development in China, we divided all province-level subdivisions of China into the eastern, central region, western, and northeastern regions, using the Theil index to perform regional analysis and studying the trends of changes.

7KH7KHLOLQGH[HVRIUHJLRQDOOHYHOVRIUXUDOXUEDQFRRUGLQDWHG GHYHORSPHQW Assuming that Ui is the score of the level of rural-urban coordinated development of the ith province (region), n is the number of provinces (regions) in discussion, Ti = Ui / ƺ8i represents the ratio of the level of rural-urban coordinated development of the ith province (region) to the national level, Td   = ƺd Ti, Tz   = ƺz Ti, Tx   = ƺxTi, and Tk   ƺkTi refer to the ratios of the scores of levels of rural-urban coordinated development of the eastern, central, western, and northeastern regions to the national level, respectively, and nd, nz, nx, and nk are the number of provinces in the four regions. The Theil index J of China’s overall level of rural-urban coordinated development and the Theil indexes Jd, Jz, jx, and Jk of the eastern, central, western, and northeastern regions are as follows:

                          n

 

 

 

 

 

J = ƺ7i  Ln (nTi)

 

i=1

   

 

(2-12)

 

nd

Jd = ƺ(Ti/Td) Ln (ndTi/Td) i=1

 

 

   (2-13)

                                          nz

Jz = ƺ(Ti/Tz) Ln (nzTi/Tz) i=1

 (2-14)

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CHINA’S ECONOMY ISSUES 8

nx

                                           (2-15)

Jx = ƺ(Ti/Tx) Ln (nxTi/Tx) i=1

                                            nk

Jk = ƺ(Ti/Tk) Ln (nkTi/Tk)

(2-16)

i=1

Assuming that Jr and Jj represent the intra- and inter-regional differences of the eastern, central, western, and northeastern regions, respectively, we can obtain the following equations: Jr = Td  Jd + Tz  Jz + Tx  Jx + Tk  Jk nd nz nx nk Tj   Tj   Tj   Tj   = ƺ7j Ln (nd   ) + ƺ7j Ln (nz ) + ƺ7j Ln (nx ) + ƺ7j Ln (nk ) T T T Tk j=1 j=1 j=1 j=1 d z x    

 

(2-17)

 

        Jj    = Td Ln (Td    n ) + Tz Ln (Tz    n ) + Tx Ln (Tx n ) + Tk Ln (Tx    n ) nd nz         nx nk    

J  =  Jr  +  Jj  

 

 

 

 

 

 

 (2-18)  

 

 

(2-19)

$QDO\VLVRIUHJLRQDOGLIIHUHQFHVLQWKHOHYHOVRIUXUDOXUEDQ FRRUGLQDWHGGHYHORSPHQW Tables 2.7 and 2.8 show the Theil indexes of the levels of rural-urban coordinated development of provinces (regions) calculated with formulae (2–12) to (2–19). Fig. 2.1 shows the trends of changes in regional differences in the past 10 years. Table 2.7

National Year Theil index

The Theil indexes of regional levels of rural-urban coordinated development in China during the period of 1995 to 2004 Contribution of eastern region

Contribution of central region

Contribution of western region

Contribution of northeastern region

Regional contribution

Theil Proportion Theil Proportion Theil Proportion Theil Proportion Theil Proportion index (%) index (%) index (%) index (%) index (%)

1995 0.136 41 0.034 06

24.97

0.001 73

1.27

0.013 01

9.54

0.002 35

1.72

0.085 26

62.50

1996 0.128 79 0.031 45

24.42

0.001 81

1.40

0.012 38

9.61

0.001 70

1.70

0.080 96

62.86

1997 0.125 15 0.032 83

26.23

0.002 13

1.70

0.012 25

9.79

0.002 23

1.78

0.075 72

60.50

1998 0.119 70 0.029 75

24.85

0.002 37

1.98

0.011 63

9.71

0.002 63

2.20

0.073 32

61.26

1999 0.107 21 0.024 88

23.21

0.002 78

2.59

0.011 25

110.50

0.002 63

2.20

0.073 32

61.26

2000 0.107 33 0.026 74

24.91

0.002 48

2.31

0.011 77

10.96

0.002 18

2.03

0.064 16

59.78

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

(Cont’d) National Year Theil index

Contribution of eastern region

Contribution of central region

Contribution of western region

Contribution of northeastern region

Regional contribution

Theil Proportion Theil Proportion Theil Proportion Theil Proportion Theil Proportion index (%) index (%) index (%) index (%) index (%)

2001 0.101 86 0.024 15

23.71

0.001 91

1.87

0.010 75

10.56

0.001 84

1.80

0.063 22

62.06

2002 0.099 79 0.024 64

24.69

0.001 23

1.23

0.009 12

9.14

0.001 87

1.87

0.062 93

63.06

2003 0.079 54 0.021 30

26.78

0.001 09

1.38

0.006 45

8.11

0.001 56

1.77

0.049 29

61.97

2004 0.075 86 0.020 29

26.75

0.000 92

1.22

0.005 14

6.77

0.001 10

1.45

0.048 40

63.81

Source: Calculated from the data in Table 2.2.

Table 2.8

The Theil indexes of regional levels of rural-urban coordinated development in China during the period of 2005 to 2007

Contribution of Contribution of Contribution of Contribution of Regional National eastern region central region western region northeastern region contribution Year Theil index Theil Proportion Theil Proportion Theil Proportion Theil Proportion Theil Proportion index (%) index (%) index (%) index (%) index (%) 2005 0.127 22 0.032 13

25.26

0.002 13

1.67

0.012 91

10.14

0.002 07

1.63

0.077 99

61.30

2006 0.115 41 0.031 46

27.26

0.001 94

1.68

0.015 54

13.47

0.001 76

1.52

0.064 70

56.07

2007 1.104 86 0.026 38

25.16

0.002 45

2.33

0.013 91

13.26

0.001 78

1.70

0.060 35

57.55

Source: Calculated from the data in Table 2.2.

Fig. 2.1

Trends of changes in regional levels of rural-urban coordinated development in China during the period of 1995 to 2004

0.16 0.14

Theil index

0.12 0.10 0.08 0.06 0.06 0.04 0.02 0.00 1995

1996

1997

1998

1999

2000 Year

2001

2002

2003

All China

Eastern region

Central region

Western region

Northeastern region

Inter-region

2004

53 CE_CH2.indd 53

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CHINA’S ECONOMY ISSUES 8

Basic conclusions First, regional differences in the levels of rural-urban coordinated development basically presented a downward trend during the period of 1995 to 2004, and the level in 2004 was 44.39% below that in 1995. During the period of 1995 to 1999, the level decreased by 5.80% on average annually, and it was a relatively small margin. From 2000 to 2004, the level decreased by 8.01% on average annually, displaying a relatively large margin. The continuous decrease of the national Theil index shows that the levels of rural-urban coordinated development presented a general trend of convergence, and it is obvious that the more rapid changes of index values after 2000 was closely related to the implementation of strategy of western development. 7KLVLVSURYHQE\WKHVLJQLÀFDQWGHFUHDVHLQWKH7KHLOLQGH[RIWKHZHVWHUQUHJLRQ which had varied little, after 2000. Second, with respect to the structure of overall differences during the period of 1995 to 2004, inter-regional differences accounted for 61.92%, while differences within the eastern region, which had the most conspicuous internal differences, accounted for 25.05%. Internal differences in the central and western region, which were relatively smaller, accounted for 1.70% and 9.47%, respectively. Internal differences of the northeastern region accounted for 1.86%. See Table 2.9 for details. Table 2.9

The structure of internal differences in the levels of rural-urban coordinated development in China during the period of 1995 to 2004

Region

All China

Eastern region

Northeastern region

Central region

Western region

Proportion (%)

61.92

25.05

1.86

1.70

9.47

Thus, it is obvious that regional differences in the levels of rural-urban coordinated development are mainly brought by inter-regional differences, but the internal differences in the eastern region should not be ignored. Accordingly, in the future, coordinated rural-urban development in China should focus on the elimination of inter-regional difference while paying close attention to differences between areas within a region (especially in the eastern region). Third, among the four regions, the eastern region had the largest Theil index, followed by the western region. The Theil indexes of the central and northeastern regions were relatively small, indicating that internal differences were more VLJQLÀFDQW LQ WKH HDVWHUQ UHJLRQ 7KH HDVWHUQ UHJLRQ VKRZHG WKH PRVW VHULRXV imbalance in rural-urban coordinated development as it includes areas with high

54 CE_CH2.indd 54

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

levels of rural-urban coordination such as Beijing, Shanghai, and Tianjin on the one hand, and provinces with poor coordination such as Hebei Province and Hainan 3URYLQFHRQWKHRWKHU7KHUHODWLYHO\VLJQLÀFDQWLQWHUQDOGLIIHUHQFHVLQWKHZHVWHUQ region are highly related to the developmental priorities established in the early stage of the western region development program. Provinces and regions such as Chongqing, Shaanxi Province, Yunnan Province, and Sichuan Province with KLJK VFRUHV KDYH EHHQ LGHQWLÀHG DV WKH NH\ DUHDV RI GHYHORSPHQW ZKLOH SODFHV like the Inner Mongolia Autonomous Region, Qinghai Province, and Tibet with low scores have not been made the focus so far. Internal differences in the central and northeastern regions are minimal because of the consistently wide gap of development between rural and urban areas across all provinces. (For example, the scores of Xmax – Xmin of the central and northeastern regions in 2004 were 11.14 and 13.72, respectively, while those of the eastern and western regions were 64.87 and 18.4, respectively.) In other words, this kind of “balance” is but low-grade internal equilibrium, as the levels of rural-urban coordination in these regions are much lower than that of the eastern region as well as the national average. Finally, inter-regional differences contributed more than 50% of the overall differences in the levels of rural-urban coordinated development, and their effects have been drastically expanding. The corresponding percentage reached a peak in 2004 at 63.81%, indicating that inter-regional differences were still the leading factor of the differences in the levels of rural-urban coordinated development. Hence, accelerating the coordinated development between the rural and urban areas in the four regions and narrowing regional gaps are still important tasks for future development. 7RIXUWKHUYHULI\WKLVSRLQWZHKDYHFRPSXWHGWKHFRHIÀFLHQWVRIYDULDWLRQRI DOOSURYLQFLDOUHJLRQVRI&KLQDDVZHOODVWKHIRXUUHJLRQV7KHSURYLQFLDOFRHIÀFLHQW of variation was 3.01 in 1995 and 2.60 in 2004, indicating that the gap in regional FRRUGLQDWHGUXUDOXUEDQGHYHORSPHQWZDVQDUURZLQJ7KHFRHIÀFLHQWRIYDULDWLRQ of the four regions was 0.75 in 1995 and 0.71 in 2004, indicating the same narrowing trend in the inter-regional differences of coordinated rural-urban development, which is consistent with the above calculations. In conclusion, since 2005, regional differences in the coordinated rural-urban development of China have continued to display a downward trend. Compared WRWKH7KHLOLQGH[RIWKHFRHIÀFLHQWVRIYDULDWLRQRIUXUDOXUEDQFRRUGLQDWHG development dropped by 9.1% in 2007. Looking at the four regions, the eastern UHJLRQ VKRZHG WKH ODUJHVW 7KHLO LQGH[ PHDQLQJ WKH PRVW VLJQLÀFDQW LQWHUQDO differences. The western region had the second largest Theil index, while both the central and northeastern regions had minor internal differences. In the western UHJLRQ WKH ORZ FRHIÀFLHQWV RI YDULDWLRQ RI *XL]KRX 3URYLQFH 0 H[   0, [” Obviously, N(r) increases alongside the increase of r. When r approaches R, N(r) N; when r is too small, N(r) 0; and when r takes an appropriate value to enable N(r) to become a power function along with the change of r, the subset will display fractal characteristics, with the fractal dimension being D1= lnN(r) / lnr. The fractal dimension D1 can be obtained from the bi-logarithmic diagram ln1U ïOnrWKURXJKOLQHDUOHDVWVTXDUHVÀWWLQJDQGLWUHÁHFWVWKHVSDWLDOGLVWULEXWLRQ of the index coordinates. For regions with a higher level of rural-urban coordinated development, the coordinates tend to be farther apart from the origin point in the N-dimensional Euclidean space, and vice versa. Since the gradient corresponding to regions with higher levels of coordinated development on the bi-logarithmic diagram is always larger than that for regions with lower levels of coordinated development, the fractal dimension can be used WRUHÁHFWWKHOHYHOVRIUXUDOXUEDQFRRUGLQDWHGGHYHORSPHQWLQGLIIHUHQWUHJLRQV

The process of evaluation 7KHVWDQGDUGL]DWLRQRILQGH[HV The standardization of evaluation indexes is conducted to eliminate the dimensions of indexes. We have adopted membership functions of fuzzy sets to standardize the indexes, using upper semi-trapezoidal membership functions for positive indexes: qij  = ([ij – min{[ij})/(max{[ij} – min{[ij}) × 100

57 CE_CH2.indd 57

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CHINA’S ECONOMY ISSUES 8

$V IRU QHJDWLYH LQGH[HV TXDQWLÀFDWLRQ LV SHUIRUPHG XVLQJ ORZHU VHPL trapezoidal membership functions: qij  = (max{[ij} – [ij)/(max{[ij} – min{[ij}) × 100 [ij refers to the original value of the index j for province i. PD[^[ij} and PLQ^[ij} represent the maximum and minimum values of the index j, respectively. qij is a standardized value between 0 and 100.

&DOFXODWLRQVRIIUDFWDOGLPHQVLRQV We have calculated the number N(r) of standardized indexes of Chinese provincelevel subdivisions in 2004 that fall within the sphere with r being the radius in the N-dimensional Euclidean space and found out its logarithm. The results are as shown in Table 2.10. Table 2.10

The mapping table of dimensions OnN(r) and Onr regarding the levels of rural-urban coordinated development in China’s province-level subdivisions

R Lnr

10

20

30

40

50

60

70

80

90

100

110

2.302 6 2.995 7 3.401 2 3.688 9 3.912 0 4.094 3 4.248 5 4.382 0 4.499 8 4.605 2 4.700 5

Beijing lnN (r)

—

—

—

—

Tianjin lnN (r)

0

0

0

0

—

—

0

0.693 1 1.945 9 2.639 1 2.944 4

0.693 1 1.791 8 2.079 4 2.397 9 2.708 1 2.944 4 2.944 4

Hebei Province lnN (r)

1.791 8 2.079 4 2.079 4 2.484 9 2.639 1 2.833 2 2.833 2 2.944 4 2.944 4 2.944 4 2.944 4

Shanxi Probince lnN (r)

1.098 6 1.945 9 2.302 6 2.564 9 2.772 6 2.772 6 2.772 6 2.890 4 2.944 4 2.944 4 2.944 4

Inner Mongolia Autonomous Region lnN (r)

1.791 8 2.397 9 2.564 9 2.564 9 2.833 2 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

Liaoning Province lnN (r)

0.693 1 1.386 3 1.945 9 2.302 6 2.484 9 2.708 1 2.708 1 2.890 4 2.944 4 2.944 4 2.944 4

Jilin Province lnN (r)

1.386 3 2.079 4 2.302 6 2.484 9 2.708 1 2.833 2 2.833 2 2.944 4 2.944 4 2.944 4 2.944 4

Heilongjiang Province 1.609 4 2.302 6 2.397 9 2.484 9 2.484 9 2.708 1 2.833 2 2.944 4 2.944 4 2.944 4 2.944 4 lnN (r) Shanghai lnN (r)

—

—

—

—

0

0.693 1 1.098 6 1.098 6 1.609 4 2.079 4 2.944 4

58 CE_CH2.indd 58

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

(Cont’d) R

10

20

30

40

50

60

70

80

90

100

110

Jiangsu Province lnN (r)

0.693 1 1.609 4 1.945 9 2.079 4 2.197 2 2.197 2 2.484 9 2.772 6 2.890 4 2.890 4 2.944 4

Zhejiang Province lnN (r)

0.693 1 1.609 4 1.791 8 2.079 4 2.197 2 2.302 6 2.564 9 2.639 1 2.944 4 2.944 4 2.944 4

Anhui Province lnN (r)

1.945 9 2.079 4 2.397 9 2.397 9 2.708 1 2.833 2 2.890 4 2.890 4 2.890 4 2.890 4 2.890 4

Fujian Province lnN (r)

0.693 1 1.945 9 2.079 4 2.302 6 2.484 9 2.639 1 2.890 4 2.890 4 2.890 4 2.944 4 2.944 4

Jiangxi Province lnN (r)

1.386 3 2.197 2 2.302 6 2.639 1 2.833 2 2.833 2 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4

Shandong Province lnN (r)

1.098 6 1.791 8 1.791 8 2.079 4 2.397 9 2.639 1 2.833 2 2.890 4 2.944 4 2.944 4 2.944 4

Henan Province lnN (r)

1.945 9 2.197 2 2.397 9 2.708 1 2.772 6 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4

Hubei Province lnN (r)

1.791 8 2.079 4 2.397 9 2.484 9 2.708 1 2.833 2 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4

Hunan Province lnN (r)

1.945 9 2.302 6 2.397 9 2.708 1 2.833 2 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4

Guangdong Province lnN (r)

0

1.791 8 2.197 2 2.197 2 2.397 9 2.564 9 2.708 1 2.833 2 2.890 4 2.890 4 2.944 4

Guangxi Province lnN (r)

1.945 9 2.197 2 2.772 6 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

Hainan Province lnN (r)

1.609 4 2.397 9 2.484 9 2.772 6 2.772 6 2.772 6 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4

Chongqing lnN (r)

2.079 4 2.564 9 2.708 1 2.833 2 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

Sichuan Province lnN (r)

2.197 2 2.302 6 2.639 1 2.708 1 2.890 4 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4

Guizhou Province lnN (r)

2.079 4 2.564 9 2.708 1 2.833 2 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

Yunnan Province lnN (r)

2.197 2 2.639 1 2.708 1 2.772 6 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

Tibet Autonomous Region lnN (r)

2.397 9 2.639 1 2.772 6 2.708 1 2.833 2 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

Shaanxi Province lnN (r)

1.609 4 2.197 2 2.484 9 2.708 1 2.772 6 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

Gansu Province lnN (r)

2.397 9 2.639 1 2.772 6 2.833 2 2.833 2 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4 2.944 4

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CHINA’S ECONOMY ISSUES 8

(Cont’d) R

10

20

30

40

50

60

70

80

90

100

110

Qinghai Province lnN (r)

1.9459 2.1972 2.6391 2.7726 2.7726 2.8332 2.9444 2.9444 2.9444 2.9444 2.9444

Ningxia Hui Autonomous Region lnN (r)

1.386 3 1.945 9 2.564 9 2.639 1 2.708 1 2.833 2 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4

Xinjiang Uygur Autonomous Region lnN (r)

1.945 9 2.079 4 2.484 9 2.639 1 2.833 2 2.890 4 2.890 4 2.944 4 2.944 4 2.944 4 2.944 4

Notes:

(1) “—” means no value available. (2) The fractal dimension of each provincial-level region can be obtained by working out the bi-logarithmic diagram lnN(r)ïln(r) of the dimension of its level of rural-urban coordinated development, and performing linear least VTXDUHVÀWWLQJ (3) The fractal dimensions of the level of rural-urban coordinated development of each provincial-level region are: D1Beijing = 6.9823, D1Tianjin = 1.5117, D1Hebei = 0.5518, D1Shanxi = 0.7389, D1Inner  Mongolia = 0.4641, D1Liaoning = 0.9796, D1Jilin = 0.6484, D1Heilongjiang = 0.5347, D1Shanghai = 3.2587, D1Jiangsu = 0.8948, D1Zhejiang = 0.9185, D1Anhui = 0.4689, D1Fujian = 0.8804, D1Jiangxi = 0.6230, D1Shandong = 0.8249, D1  Henan = 0.4583, D1Hubei  = 0.5274, D1Hunan = 0.4414, D1Guangdong = 1.0709, D1Guangxi = 0.4241, D1Hainan = 0.5031, D1Chongqing = 0.4109. D1Sichuan = 0.3482, D1Guizhou = 0.3482, D1Yunnan = 0.2887, D1Tibet = 0.2277, D1Shaanxi = 0.5504, D1Gansu = 0.2250, D1Qinghai = 0.4359, D1Ningxia = 0.6447, D1Xinjiang = 0.4758.

Analysis of the evaluation results 7KHYDOXHVRIWKHIUDFWDOGLPHQVLRQVUHÁHFWWKHOHYHOVRIUXUDOXUEDQFRRUGLQDWHG development of each provincial-level region in China in 2004. Considering the intervals of the fractal dimensions, provinces and regions with a score higher than 1.0 included Beijing, Tianjin, Shanghai, and Guangdong Province, which are areas with high levels of development and urbanization, sound infrastructure, and VWURQJLQÁXHQFHVRYHUVXUURXQGLQJDUHDV7KXVWKHJDSEHWZHHQUXUDODQGXUEDQ areas was relatively low in these areas. There were altogether 14 province-level subdivisions that received a score between 0.5 and 1.0, including Hebei Province, Shandong Province, Jiangsu Province, Zhejiang Province, Fujian Province, and Hainan Province in the eastern region; Liaoning Province, Heilongjiang Province, and Jilin Province in the northeastern region; Shanxi Province, Hubei Province, and Jiangxi Province in the central region; and Shaanxi Province and Ningxia Hui Autonomous Region in the western region. Among the 13 provinces and regions that had a score below 0.5, 10 belong to the central and western regions, including Anhui Province, Henan Province, and Hunan Province in the central 60 CE_CH2.indd 60

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Comprehensive Evaluation of the Levels of Rural-Urban Coordinated Development

region. This indicates the low levels of rural-urban coordinated development in most provinces in the western region, which are backward in economic and infrastructural development, low in population quality, and lack pivotal central FLWLHV7KHORZVFRUHVRIWKHWKUHHSURYLQFHVLQWKHFHQWUDOUHJLRQUHÁHFWWKHSUREOHP of “central subsidence” and reveal the great challenge in coordinating rural and urban development in the central and western regions. Fig. 2.2, which displays changes in the rankings of provinces and regions, shows QRVLJQLÀFDQWÁXFWXDWLRQVLQPRVWDUHDVGXULQJWKHSHULRGRIWR:KHQ comparing the situation of 1997 with that of 2004, apart from a few provinces such as Heilongjiang Province, Anhui Province, Hunan Province, and Shaanxi Province, all others only experienced a change in rankings from 1 to 3. Anhui Province, Hunan Province, Jiangsu Province, Guizhou Province, Qinghai Province, Ningxia Hui Autonomous Region, Beijing, Shanxi Province, Jiangxi Province, Shandong Province, Hubei Province, Hainan Province, and Xinjiang Uygur Autonomous Region were in the stage of ascension. Those in the stage of decline were: Jilin Province, Shanghai, Fujian Province, Hebei Province, Inner Mongolia Autonomous Region, Liaoning Province, Guangdong Province, Chongqing, Henan Province, Gansu Province, Shaanxi Province, and Heilongjiang Province. The ranks of Tianjin, Zhejiang Province, Guangxi Province, Sichuan Province, Yunnan Province, and Tibet remained unchanged throughout the years. Fig. 2.2

Patterns of rural-urban coordinated development in China’s province-level subdivisions in terms of fractal dimensions

Heilongjiang Province Xinjiang Uygur Autonomous Region

Inner Mongolia

Liaoning Beijing Province Gansu Ningxia Hui Hebei Province Autonomous Shanxi Province Shandong Region Qinghai Province Province Province Jiangsu Shaanxi Henan Province Province Province Tibet Hubei Anhui Shanghai Autonomous Sichuan Province Region Province Chongqing Province Jiangxi Zhejiang Guizhou Hunan Province Province Province Province Fujian Province N Yunnan Guangxi Guangdong Province Province Province Taiwan Hong Kong Macau

Jilin Province

< 0.4 0.4-0.5 0.5-1.0 >1.0 No Data

Hainan Province

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)URPWKHSHUVSHFWLYHRIWKHFODVVLÀFDWLRQRIVFRUHVLQRQO\RQHSURYLQFH level region obtained a score between 80 and 100, three scored between 60 and 80, seven scored between 40 and 60, and all others had a score less than 40. Thus, it is clear that the levels of rural-urban coordinated development in China were low in general, and display considerable regional differences. Only four province-level subdivisions obtained high scores (above 60), accounting for less than 15% of all provinces, and they are all located in the developed part of the eastern region. Nearly 65% of China’s province-level subdivisions received low scores (below 40), and they are all located in the central and western regions. However, when it comes to changes throughout China from 1995 to 2004, both the overall and provincial levels of rural-urban coordinated development showed signs of improvement, displaying a tendency of narrowing regional gaps. The number of provinces and regions with a score between 60 and 100 increased from WZR WR IRXU DQG EHWZHHQ  DQG  LQFUHDVHG IURP ÀYH WR VHYHQ ZKHUHDV WKRVH with a score below 40 decreased by three. Moreover, the scores of all provinces and regions had increased to various extents, as shown in Table 2.11. Table 2.11

Levels of rural-urban coordinated development in China’s province-level subdivisions

Level of coordinated development

High

Medium

Fair

Guangxi Fujian Province, Province, Zhejiang Province, Hunan Jiangsu Province, Province, Shandong Anhui Province, Jiangxi Province, Province, Hubei Henan Beijing, Province, Shanxi Province, Provinces Shanghai, Province, Shaanxi Chongqing, (municipalities, Tianjin, Province, Ningxia Qinghai regions) Guangdong Hui Autonomous Province, Province Region, Xinjiang Hebei Province, Uygur Liaoning Province, Autonomous Jilin Province, Region, Heilongjiang Inner Province, Hainan Mongolia Province Autonomous Region

Low

Gansu Province, Sichuan Province, Guizhou Province, Yunnan Province, Tibet Autonomous Region

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Chapter The Socioeconomic Causes of Rural-­ Urban Uncoordinated Development

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The evolution of imbalanced development between rural and urban areas in China has been deeply rooted in a series of socioeconomic factors. Before its reform and opening up, a rural-urban dual economic structure had germinated from the institutional priority to promote heavy industry. After its reform and opening up, the rapid development of urban areas, and the perpetuation of mechanisms that sanction the rural-urban divide have hindered the elimination of the dualistic structure.

The Strategic Causes of Rural-Urban Imbalanced Development The imbalanced socioeconomic development of rural and urban areas has been a response to government-directed strategic factors. In the early stage of the foundation of the PRC, the country implemented a “forging ahead strategy” which stressed on industrial development at the expense of agriculture. This resulted in a serious imbalance in the national economic structure amid rapid industrial development and gave birth to an extreme urban-rural dual structure. After its reform and opening up, China shifted its emphasis toward export-oriented industries with a focus on the East Asian market, which set off an age of rapid economic development, for which coastal areas become the engine. This period also marked another phase of widening rural-urban divide.

The forging ahead strategy The forging ahead strategy implemented after the foundation of the PRC aimed to catch up with the pace of industrialization of Western developed countries. Immediately, a comprehensive national industrial mechanism was set up as a product of this strategy. However, this strategy had the side effect of intensifying the pre-existing urban-rural dual structure.

The forging ahead strategy in general The forging ahead strategy is a developmental strategy proposed in light of the pace and characteristics of modernization, which is the ultimate goal of the VWUDWHJ\ *HQHUDOO\ VSHDNLQJ ZKLOH WKH ÀUVWFRPHUV WR PRGHUQL]DWLRQ WHQGHG WR lead an orderly, steady path of development, the latecomers are more inclined to “forge ahead” due to pressure and challenges from the external environment. The

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The Socioeconomic Causes of Rural-Urban Uncoordinated Development

Second World War was followed by the rapid emergence of socialist countries. As the socialist system was mostly established in poor and less-developed countries, catching up with developed capitalist countries became their urgent mission. Initiated by the Soviet Union, the forging ahead strategy became the common DSSURDFK WR PRGHUQL]DWLRQ 8QGHU LWV GLUHFW LQÁXHQFH &KLQD DOVR SURSRVHG LWV version of forging ahead strategy. The forging ahead strategy is a broad and general approach that can be stretched to a wide range of areas. However, in the context of the Soviet Union and other socialist countries, the focuses were on high-speed industrialization and the prioritization of heavy industry, which essentially formed the core of their traditional economic strategy and general economic policy. Based on these leading principles, the strategy played a positive role in consolidating national defense, laying the foundation for industrialization, and accelerating modernization in less developed countries. However, the forging ahead strategy was also implemented at the expense of agriculture and light industry, which was detrimental to the national economy structure. Unhealthy to the sustainable development of the national economy and ineffective in improving people’s living standards, it produced little internal driving force for national modernization. In addition, the approach of extensive economic growth was characterized by the exhaustion and ineffective use of raw materials and energy, and would eventually lead to a downward trend of economic growth.

China’s forging ahead strategy The problem of industrialization in agrarian countries is, to a great extent, the problem of capital accumulation. The case of China was unique in the sense that it was not only a backward and large agrarian country, but also led an “independent and self-reliant” path of industrialization with almost no support from external sources of capital. With extremely limited capital accumulated within the country, the burden of developing capital-intensive heavy industries at an ultra-high speed became all the heavier. The essence of China’s strategies of industrialization and urbanization was to stretch limited economic resources to the utmost to serve heavy industries on a centralized basis in order to ensure their prioritized and rapid development. As such, heavy industries not only absorbed all investments that would be necessary for other industries or sectors, but also those for future developments.

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