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China should adopt new strategy to urbanize massive rural areas
2003-10-14
China Business Weekly
China is facing a tough task to resolve the problems brought by a dual structure in its economy to sustain long term stable growth as it moves from a planned to a market economy.
China's economic growth is currently very imbalanced, with an oversized agriculture and other traditional forces, insufficient development of modern industries and a wide gap between the urban and rural economies.
Such a dual structure in the economy has led to a chain reactions in employment, income distribution and utilities construction, holding the nation back from the combination of equality, fairness and efficiency -- the prime principles of the market economy.
The massive rural population has yet to overcome the man-made barriers for rural labours and constructions, which has slowed down the pace of urbanization and modernization.
The only way out is to remove such barriers and strike a balance between the urban and rural regions.
For example, more surplus rural labour should be encouraged to migrate into the cities and towns, which will reduce the rural population and increase the urban population. That will ultimately upgrade the economic structure and production efficiency.
But exactly what road should China choose to urbanize the massive rural areas?
In the past, it had followed the direction of developing the small cities and towns while controlling the speed of expansion for the big cities.
However, that has proven impractical.
First, building up the towns and small cities cost much more land resources than developing the medium and big cities. Small cities would normally claim 450 to 550 square metres of land use per capita, while the bigger cities only took about 60 to 100 square metres per capita or even less.
Secondly, the limited scale of the small cities and towns also decreased the efficiency of investment in infrastructure facilities and utilities as well as the profit margin.
All these would make such small cities and towns practically more expensive for the rural labourers to start up businesses, leading to the shortage of local pillar industries, unemployment and other problems and making them less attractive to immigrants.
Some of the rural immigrants to these towns and small cities have actually been doing much the same job they did in the villages, such as animal and plant raising, to make a living, so the meaning of urbanization had been greatly discounted.
Therefore, a new trend of urbanization in the academic circle is putting more attention on developing the big cities.
The big cities are at the front of modernization and always lead the growth of the neighbouring region.
With the advantage in manufacturing and infrastructure construction, some big cities have been integrating with the neighbouring region and form complex municipalities.
Advanced information services, a diversified industrial structure and convenient transportation provide more jobs for the immigrants with comparatively higher salaries.
The big population base and higher demand for good services also creates opportunities for the tertiary industries and helps upgrade the local economic structure.
The development of tertiary industry normally creates more jobs. Statistics indicated that the sector had actually been the biggest job provider over the past decade. Between 1996 and 2001, about 70 million labourers entered tertiary industries, about 20 million of which were transferred from the agricultural and industrial sectors.
Meanwhile, in the rural regions, with the productivity increase in agricultural, there has been more surplus labour and declining incomes have become a big problem.
It is only a short-term solution to rely on the readjustment of the agricultural structure to improve the income of rural households. In the long term, the migration of more rural population into cities is an unavoidable trend.
Then, how should we divert more rural residents into the big cities? That needs more thorough reform on the residential control and payment systems.
The traditional management scheme of the residential permit in the cities that set barriers for outsiders should be changed.
For example, in municipalities like Beijing and Shanghai, where residents enjoy a more advanced welfare system and public utilities, the local government normally set more curbs on immigrants. But such barriers, which are against the free labour flow rule and the principle of fair competition, have set obstacles for a balanced development of the urban and rural population and should therefore be lifted. It is not right to let some interest groups in the cities monopolize public welfare resources.
It is a positive development that China has basically set up an independent social security system for employees in urban institutions. And some cities have started to provide social security benefits for rural workers. Some are also lifting residential controls on rural immigrants.
As the economic and social reforms continue, the labour market in both the urban and rural areas will be integrated, which facilitates free labour flow and better protection of the labour interest.
In parallel, the payment scheme is also facing reforms to ensure equal treatment for rural labourers. It should follow the market rules and be decided by the actual demand and supply in the labour market.
Meanwhile, the government should design guidelines to ensure fair pay and salary growth according to the actual economic development and consumption prices.
Following China's entry to the World Trade Organization, the investment environment in the country will ultimately improve greatly and more foreign investors will enter the domestic market.
As a labour-intensive market, China will see its labour forces more closely related to changes in the international climate and labour market. And the price of foreign labour and increasing global labour flow will also have more impact on the domestic market.
Last but not the least, comes the relationship between the local government and the general public during the urbanization process, especially land use.
The government should be aware of its position in urban city construction and try to avoid the abuse of power by separating its public management functions from the business operation that should be implemented in a free market environment
But some developers and government departments have stepped across the line to take over the land of some farmers and caused relative land disputes. Such disputes would create serious social problems and produce social instability.
The author is a researcher with the Development and Research Department of the State Information Centre
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