By Han Jun, Development Research Center of the State Council (DRC)

Research Report No 52, 2011

I. Mechanism and Present State of Urban-Rural Basic Public Service Provision

China had, for long, practiced a dualist system for urban and rural areas, and also for the public service provision in urban and rural areas. Under this system, different mechanisms were employed to provide public services for urban and rural residents and the allocation of public fiscal resources carried a tangible preference for industries and cities. While urban public products and services were basically provided by public finance, the rural counterparts were mainly provided by farmers themselves instead. Although certain fiscal outlays were arranged at various levels for the provision of rural education, medical care, social security, public infrastructure and other public services, both the total and relative levels were very low when compared with those for cities. This has resulted in a huge gap between the public services enjoyed by urban and rural residents. The public finance system in China, proposed in 1998, failed to cover rural areas. Rural coverage by public finance did not appear until the concept of balanced economic and social development was first introduced at the 16th CPC National Congress. When the 5th Plenary Session of the 16th CPC Central Committee announced that building a new socialist countryside would be a major historic task, rural coverage by public finance was raised for the first time as a policy orientation. Since then, various policies have been introduced for public finance to cover rural areas. While the policy scope has been constantly widened, the support by public finance for rural development has been extended from the former relatively narrow agricultural production to the provision of rural public services and the construction of public infrastructures, and gradually to rural education, medical care, old-age insurance, culture, road construction, human and animal drinking water and energy. Since the 16th CPC National Congress, governments at all levels have increased inputs in rural infrastructures and social undertakings. Rural infrastructure construction has witnessed an unprecedented scale and intensity, and rural social undertakings have been developing rapidly.

First, comprehensive free compulsory education has been introduced and the support by public finance for it has been intensified. In 2007, China began to include all rural students (including those in counties and towns) across the country into the coverage of "two exemptions and one subsidy"，namely the exemption of. tuition and school fees and subsidy for dormitory fee. As a result, a total of 150 million rural students receiving compulsory education do not have to pay tuition fee and miscellaneous charges. In addition, they can have free textbooks provided by the government and millions of poor boarding students in rural areas also receive higher living allowances.

Second, the new rural cooperative medical system has been developing rapidly since its pilot practice in 2003. So far, it has basically covered all rural residents and become an important social security system for rural areas.

Third, a minimum living allowance system began to be established in rural areas in 2007. By the end of November 2010, a total of 51.06 million rural residents had been covered by it.

Fourth, the experiment on a new rural insurance system was comprehensively launched in 2009 to explore how to establish a new rural insurance system incorporating personal contribution, collective subsidy and government subsidy. By 2010, a total of 103 million rural people had participated in rural insurance and as many as 28.6255 million of them had received benefits.

Fifth, China has launched a project to renovate ramshackle rural houses and provided subsidy for housing construction by rural families who live in dilapidated houses. In 2009, the State provided fiscal subsidy for 800,000 households.

Sixth, the construction of rural water, electricity, road, natural gas, Internet and other infrastructure facilities has been intensified in an all-round way. Take water projects as an example. China has made tangible progress since it launched the rural safe drinking water project in 2005. During the 2006~2010 period, a total of 215 million rural people had gained access to safe drinking water, with the direct investment by the State totaling more than 100 billion yuan. China has also made continuous progress in constructing rural water projects, focusing on the water-saving transformation in large irrigation areas, the demonstration projects on water-saving irrigation, and the key counties designated by the State for the construction of small water projects.

II. Major Issues and Impacts of Existing Urban-Rural Dualist Public Service System

While China has made great efforts and scored some achievements in equalizing basic public services between urban and rural areas in recent years, the urban-rural dualist structure is still deep-rooted and has wide-ranging implications. The imbalance of public resource allocation between urban and rural areas is still prominent, and the coverage of public finance is still not wide in scope or strong in intensify. The existing inputs are far inadequate to meet the actual demand of agricultural and rural development for all public products. The system on public infrastructure construction investment, the systems on education, health, culture and other public services, and the social security system are still dualist by nature. Although these systems have been somewhat liberalized, both system adjustments and unified system arrangements require a fairly long time to complete.

1. Level of rural public services is relatively low and contrast between urban and rural looks is still sharp

(1) The problem of unsafe rural drinking water is still prominent

Currently, there are two main problems confronting the provision of safe drinking water for rural residents. One is that the new projects are large in scale and great in difficulty. The other is that the pressure to ensure the sound operation of the hundreds of thousands of completed projects is enormous. According to a survey conducted in 2009 by the Ministry of Water Resources, about 220 million rural people did not have access to safe drinking water by the end of that year. If the 60 million people who had addressed the issue of drinking water in 2010 are deducted, China still has about 160 million people who have no access to safe drinking water. They are made up of two parts. One part is about 100 million people who have been included in the national plan for rural safe drinking water projects (2005~2015) but still have no access to safe drinking water. The other is about 60 million rural people who are newly added to the list of having no safe drinking water. The newly added rural people can be further divided into three categories: the population who failed to be included in the national plan after the re-evaluation by the Ministry of Water Resources in 2004, the newly added population arising from water source pollution and depletion, earthquake, higher state water quality standards and engineering relocation, and the newly added population arising from the expanded coverage of agricultural and forestry farms and Tibetan herdsmen settlements. Meanwhile, as engineering construction advances, the easy projects have been largely completed and most of the remaining people are living in areas far from water sources, where water quality is poor, topography is complex, and engineering projects are more difficult for construction. Currently, most provinces and municipalities have a per capita investment standard of less than 500 yuan. But the actual per capita investment in many places is far higher than the state-set standard. The existing subsidy standard cannot meet the need of engineering construction.

…

If you need the full text, please leave a message on the website.