Opinion

Bridging urban-rural divide

By Michele Geraci (China Daily)
Updated: 2010-09-21 13:27

One of the byproducts of China's fast economic development over the last 30 years is the growing income disparity between rural and urban residents.

It is undeniable that absolute living conditions have improved for almost everyone, with the most notable examples at both ends of the spectrum being the eradication of poverty and the recent 30th anniversary of Shenzhen, the first special economic zone. Even if the focus of policies appears to be shifting toward filling this gap, in line with the idea of "harmonious development", the income gap is likely to grow over the next few years.

In China, allocated per capita land area is about 1.4 mu, or one-tenth of a hectare. But this number varies wildly from province to province and from county to county. In Sichuan, I have visited rural areas where per family land is about 2 mu.

Given that 1 mu of land can yield about 700 kg of rice, which a farmer sells for 2 yuan/kg, annual revenue rests at 1,500 yuan ($223.55). Subtracting the cost of producing such output (like seeds and fertilizers), it becomes clear than the actual net income is even lower. Some lucky areas, blessed with better climate, can enjoy two or even three harvest a year, thus allowing annual revenue to reach 5,000 yuan. The figures are very similar for corn production. But when the weather turns hostile, all or most of the produce can be destroyed.

Considering this, it appears that moving to a city can be an attractive option for rural residents, especially the sons and daughters of the first generation of post-1978 farmers. But without a strong education or other skills, many may end up working in restaurants or as shop assistants, earning only about 1,000 yuan a month. Even with most of their living and food expenses paid for by employers, only a few hundred yuan find the way to their parents as remittance: a small improvement, but not the solution.

Now, China has the opportunity to implement a set of policies that can make working in rural areas financially attractive for the younger generations as well and guarantee adequate food supply to the growing and more demanding population.

First, yields can be improved by modernizing production techniques and having common purchase agreements, which can partly reduce input costs. Insurance against bad weather could become the norm, with the government paying the premium.

Microfinance, still almost non-existent among low-income groups, should be promoted to give them access to credit facilities, necessary to build a sustainable development model. Social safety measures, including free education up to the university level, free healthcare and proper pension schemes, are something the government should take steps to improve.

It appears that retail prices of rice today are more than twice what farmers receive, and most of the upward food inflation pressure does not benefit farmers. Direct government intervention is needed to rebalance the economics of production and distribution, so that final retail prices do not exceed a certain multiple of farmers' income. If necessary, the government should pay direct subsidy, even if it has to be through monthly checks, to farmers.

Farmers should not be forced to give up their land, for the potential misuse of such proceeds would create far bigger problems in the long term. Besides, when economic conditions in urban areas deteriorate and migrant workers lose their jobs, a large majority of them will still have a place to return, their rural home, which provides a financial and psychological safety net.

Finally, the government should take bolder steps to stop the shrinking of agricultural land, parts of which are now being redeployed for housing or other development projects. The need to create economic growth at the local level is tempting, and that the sale of land to developers helps achieve this goal is understandable.

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But China needs to protect every square meter of its agricultural land to ensure adequate food supply for its population and to slow down the process of migration from rural to urban areas, which is depleting the countryside of much-needed manpower and overcrowding cities. The fact that low-income groups in cities, to which most of the migrant workers belong, are forced to live in poor conditions could lead to social unrest and increase the rate of crime.

China can study the inner-city life in other parts of the world to avoid committing the same mistakes that governments elsewhere have made. No theory says that the economic development of a country is measured proportionally to the decreasing contribution from its rural sector and the increasing size of its cities. It's time China asked a fundamental question: What is the right balance between rural and urban economies that will push toward its ultimate goal of building a harmonious society.

The author is head of China Program at the Global Policy Institute of London Metropolitan University and visiting scholar at Zhejiang University.