Han Jun

Research Report No 044, 2003

I. Unified planning of urban and rural economic-social development is a strategic idea and policy decision to ensure the sustained and healthy development of the national economy and the long-term peace and stability of the country

1. Unified planning of urban and rural economic-social development is a logic requirement for the realization of a virtuous circle of the urban and rural economies.

Before the reform and opening up, China had never succeeded in establishing a relationship between the urban and rural areas characterized by a balanced growth and a virtuous circle. This had resulted in a solidification of the dual urban-rural economic structure. Under the traditional planned economy, the state had for long pursued a system of unified purchase and marketing of farm produce. As a result, industrial and farm produce were unable to be traded on an equal footing, and the state obtained an enormous amount of funds from the agricultural sector through the scissors differential between the prices of industrial and farm produce. Agriculture’s status as the foundation of the national economy had been seriously weakened for a long time. Under the dual structure that separates the urban and rural areas from each other, the production factors were unable to move freely between the urban and rural areas. As a large amount of rural workforce was confined to their land, serious underemployment existed in the rural areas. The two different permanent resident registration systems respectively for the farm population in the rural areas and for the non-farm population in the urban areas have caused inequality in rights and development opportunities for urban residents and the farmers. This aggravated the structural imbalance between the urban and rural areas and seriously distorted the relationship between the urban and rural areas. After the initiation of reform and opening up, along with the introduction of market mechanism, and the development of market economy, the link between the urban and rural areas has markedly been strengthened. However, there has been no fundamental change in the dual structure that separates the urban and rural areas from each other formed under the original planned economy. Accordingly, the urban and rural economies still have not entered a virtuous circle. At present, the imbalanced relationship between the urban and rural areas is prominently demonstrated in the excessively wide gap between these two areas. In 2001, China’s per capita farmer’s income was 2,366 yuan, while its per capita disposable income in the urban areas was 6,860 yuan. The ratio between the two was 1:2.9. If the factors such as insurance, medical and housing subsidies enjoyed by urban residents are taken into account, the actual ratio between the residents’ income and consumption in the urban and rural areas was 1:4. Rural development cannot be divorced from the radiation and pull of the urban areas, and in return urban development also cannot be divorced from the promotion and support of the rural areas. The rural economy and the urban economy are interrelated, interdependent, mutual supplementary and mutually promoting. At the present development stage of the Chinese economy, failing to plan the urban and rural economic-social development in a unified way and failing to fundamentally change the dual structure that separates the urban and rural areas from each other constitute a tremendous impediment to the expansion of domestic demand, the thriving of the market and the realization of a virtuous circle and healthy development of the national economy. In addition, they also bring about a serious negative impact on social stability as well as the long-term peace and stability of the state. Planning the urban and rural economic-social development in a unified way is a major guideline and a major measure put forward by the 16th National Congress of the CPC after an in-depth summing-up of China’s decades of rich experiences in handling the relationship between the urban and rural areas. In an extremely timely manner, this major guideline also put forward the basic principles that must be observed when handling the relationship between the urban and rural areas in the process of the modernization drive. Pursuant to this major guideline, the rural areas must not be ignored and the urban areas must not be overemphasized, the urban and rural areas must be closely linked. Together, the urban areas’ role in helping and promoting the rural areas in their development and the rural areas’ role in promoting the urban areas must be given full play. The goal is to achieve an integrated economic-social development for the urban and rural areas.

2. Planning urban and rural economic-social development in a unified way has clearly showed the way and is also a major innovation for a fundamental solution of the problems facing agriculture, rural areas and farmers.

With the deepening of the market-oriented rural reform, the rural areas have undergone great changes. This has universally been recognized by the whole world. The supply of main farm produce has realized a historical transition from a protracted scarcity to an overall balance and even a surplus in good years. A rural economic system that conforms to the requirement of the development of the socialist market economy is gradually taking shape. But due to complicated reasons, the problems facing agriculture, rural areas and farmers are far from being properly solved. Whereas the shortage of farm produce that has for long plagued the development of China’s national economy has eased, the irrational structures of agriculture and the rural economy, the low overall efficiency of agriculture and the slow increase of farmers’ income still remain and have become increasingly prominent problems. Though the Chinese people’s lives on the whole have attained the level of being well off, the living standard of many rural residents is still very low. The educational and cultural levels as well as the medical and health services of the entire people have improved steadily, but education, medical care and other basic social undertakings in the rural areas are obviously lagging behind. China has done a great deal to strengthen agriculture’s status as the foundation of the national economy and to improve the farmers’ living conditions, whereas the widening income gap between the workers and the farmers, between the urban and the rural areas and between the different regions is yet to be narrowed in a fundamental way. At present stage, the problems facing agriculture, rural areas and farmers constitute constraints of deep-seated institutional contradictions and structural contradictions. In terms of institutional contradictions, there is a prevailing concept that emphasizes the urban areas and ignores the rural areas consciously or unconsciously due to the long-term influence of the dualist structure separating the two areas when handling the relationship between the two areas. The government inputs that are used to solve the problems facing agriculture, rural areas and farmers are seriously inadequate. As a result, the farmers have to bear most of the expenses for the operation of the rural grassroots administration, for education and culture, family planning, public security as well as for small and medium-sized rural infrastructure projects. The farmers have to pay too much and their burden is increasing instead of decreasing. In general, the state has taken more from the farmers than given back to them in the past 20 years or so since the initiation of reform and opening up. In terms of structural contradictions, during the period of planned economy, China had not expedited the shift of the rural workforce and population to the urban areas in the process of industrialization and urbanization. Instead, it had restricted the development of the urban areas and the movement of workforce, especially the migration of farmers to the cities for employment and settlement, in the forms of systems, policies and administrative rules. Although China’s industrialization has reached the level of the world’s moderate developed countries, its rate of urbanization is only 37.7 percent, or 10.3 percentage points lower than that of the world’s average level in 2000. At present, China’s per capita GDP is only 900 U.S. dollars,but there is already a serious constraint to the demand for farm produce. The most fundamental reason is that the proportion of the urban consumer group for farm produce is too small. The underemployment of the Chinese farmers is extremely serious, and the shift of the rural surplus labor is difficult, and the most fundamental impediment is the retarded urbanization process. In 2001, the GDP proportion of China’s agriculture fell to 15.2 percent, whereas agriculture still accounted for as high as 50 percent of the country’s total employment. The ratio between the per capita GDP created by the primary industry and the non-farm population increased from 1:3.9 in 1990 to 1:5.2 in 2001. The process of rural population moving to the non-farm occupations and to the urban areas has been slow. The excessively large proportion of farmers in the total population has resulted in a relatively low labor productivity in agriculture. This is where the crux of the problems facing agriculture, rural areas and farmers lies. Therefore, in order to find a fundamental solution to the problems facing agriculture, rural areas and farmers in the new stage, we must not confine ourselves to agriculture and rural areas as they are. The emphasis must be placed on solving the institutional and structural contradictions confronting agriculture and rural development, on changing the guiding principles for handling the relationship of interest distribution between the state and the farmers, and on changing the various systems formed under the planned economy to separate the urban and rural areas from each other. In short, the proportion of farmers in the total population must be reduced, the urbanization process of rural population must be sped up, and the role of the urban areas in helping and promoting the rural areas in their development must be given full play. So planning the urban and rural economic-social development in a unified way has clearly showed the way and is also a major innovation for a fundamental solution to the problems facing agriculture, rural areas and farmers in the new period.

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