Wang Mengkui

What we are discussing at this forum is not only a crucial task for building a well-off society in an all-round way, but a substantive issue for achieving industrialization and modernization and gradually eliminating the dual structure in urban and rural economy.

It is the most difficult task in the process of China’s modernization to build a well-off society in an all-round way, accomplish modernization gradually in rural areas and resolve the issue of agriculture and farmers completely. To surmount the difficulty, while concentrating our efforts on the issues concerning agriculture, rural areas and farmers, we also need to pay attention to matters other thanthe above issue. In the past, we used to tackle the issue on the strength of agricultural production, but now we should apply ways of industrialization, urbanization and marketization. That is to say, we will use advanced technology in transforming agriculture and overall rural economy; we will move a large number of rural labor to non-agricultural sectors by urbanization; we will adhere to the reform in the direction of socialist market economy; and we will incorporate rural economy into the nationally unified marketization and socialization. Promoting industrialization and urbanization, transferring enormous rural laborers to non-agricultural sectors, and gradually changing the dual structure of urban and rural economy are the universal law of all countries which have achieved modernization. We pushed ahead industrialization against a special historical background, in which the priority given to heavy industry resulted in the decrease of labor absorbed by unit capital, and the movement for organization of people's communes led to the shortage of grains and other agricultural products. The countermeasures adopted at that time were to pursue the policy of state monopoly of purchase and marketing and the policy of segmentation of urban and rural areas, making the country’s urbanization fall behind its industrialization. In the 21 years from 1957 to 1978, the rate of urbanization in China increased by only 2.5 percentage points. According to this speed, China would need over 400 years to achieve urbanization. So we cannot follow this way any longer. Since the mid-1980s, the country has started to loosen its policy, thereby accelerating the pace of urbanization remarkably. During the period 1985-2000, the population in cities and towns surged 210 million, with the number of cities increasing by 339. During 1978-2000, the proportion of agricultural laborers to the aggregate social labor dropped from 70 percent to 50 percent. The rate of urbanization stood at 36 percent (compared with 18 percent in 1978 by calculating withnon-comparable factors) in 2000, and 39 percent in 2002. Because we had a low start point, now the rate of urbanization is still around 10 percentage points lower than the world average level, and also evidently below that of those countries which have the same economic development level. It shows that China has enormous development potential in urbanization.

Experts fromChina and the World Bank drew the similar conclusion that the movement of labor force contributed approximately 16 percent to the economic growth rate of over nine percent in the last 20 years of the 20th century, i.e. equivalent to 1.5 percentage points. A large number of migrant laborers provided the country with cheap labor, enhanced the international competitiveness of Chinese industrial products, and also promoted large-scale urban construction largely. Now rural laborers have become indispensable to urban residents in many aspects of their daily life. In the following two to three decades, our country will maintain its advantages of competitive labor force. We should seize the scarce opportunity to actively propel the transfer of rural labor and speed up urbanization, so as to provide an important strong support for the sustained and rapid economic growth.

The Sixteenth National Congress of the Communist Party of China put forward the objective of accomplishing in the main the industrialization by 2020 and speeding up urbanization. According to our forecast, from 2000-2020 the proportion of the primary industry in China’s GDP will decline from 15.9 percent to around 10 percent, that of the secondary industry will drop from 50.9 percent to 30-40 percent, and that of the tertiary industry will soar from 33.2 percent to 50-60 percent. During the period, the proportion of agricultural labor force in the entire employed population will fall from 50 percent to 30-35 percent, equivalent to 0.75-1 percentage point decline each year, while the rate of urbanization will rise one percentage point annually to reach about 55 percent by 2020. Through our efforts, we can achieve such progress of urbanization in one year equivalent to the progress in the past decade and more.

When following the way of urbanization with Chinese characteristics, the following three points should be taken into consideration.

First, with quite a large number of population, China is now experiencing a dual transition of economic system reform and economic restructuring, which brought about heavy pressure of employment and special difficulties for the movement of agricultural laborers into non-agricultural sectors. It determines that accomplishing urbanization is a long and progressive social transition. Calculated by one-percentage point increase a year, the rate of urbanization will reach 70 percent around 2035. In the long period, urbanization will exhibit a variety of transitional shapes: a large number of agricultural laborers will move to non-agricultural sectors; the employment forms will be various; many people will not leave their farmland so quickly; some of them will return to the rural areas in face of employment difficulties. Land constitutes the foundation for the living of farmers and the stability in rural areas, which should always receive close attention. We should stick to the system of contractual management on household basis, and prudently transfer the land management right according to law on the voluntary and paid basis. It is inevitable to transform part of farmland into non-agricultural land, but we should have an overall planning with a view to using it economically, and protecting farmers’ interests. A research report indicated that among the aggregate land transfer fees, the fees paid for taking rural land accounted for a small share, which in some areas were less than 5 percent. In many regions, 50 percent of the appeals filed by farmers to the higher authorities for help were related to the transfer of land use right, which has become a major factor affecting the stability of society. It was the main financial source of counties and towns, and the source for some places to build various "image projects". That is why the incomes of farmers increase slowly and the gap between urban and rural areas is widening. The land expropriation with lower compensation has made farmers suffer losses, some of which have become the primitive accumulation for industrialization, while others flowed into the purses of developers and made some of them get rich overnight. Quite a large number of corruption and criminal cases related to land transfer and the problems in land development. We should have new statutes and policies to ensure the land use for construction by the state as well as the rights of farmers on the land. In some regions the local farmers participated in the land development by using land to subscribe for shares in the projects. The practice achieved satisfactory results. In the short term, the primitive accumulation will not be much; while in the long term, the process of industrialization will not slow down. On the contrary, the stabilization of rural society, increase of farmers’ incomes, and expansion of rural market will guarantee the industrialization being carried forward more rapidly and smoothly. That is also the two ideas about the industrialization. In addition to the land expense, the subjects also include the rural educational expenditure, state finance and taxation system, and the reform of administrative system. On the whole, we should have an overall planning on the urban and rural development, and appropriately in favor of farmers and rural areas in dealing with the relationship between workers and farmers and that between urban areas and rural areas. That is also a fundamental principle to ensure the sound development of urbanization.

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* This is the author’s address at the Forum of "Urbanization with Chinese Characteristics" jointly held by the Development Research Center of the State Council and the Economics Daily on September 14, 2003.