China's Rural Income Gap Widens
by Paul Denlinger
Posted Feb. 26, 2004
The income gap between rural and urban China has widened, and the income of urban Chinese is now more than three times greater than China's farmers.
The report, which was prepared by the Chinese Academy of Social Sciences, underline the challenges facing China's current reforms. The report puts China on a par with Zimbabwe in terms of rural-urban wealth disparity, but in fact, the gap is probably wider. China's first reforms started 25 years ago when farmers were allowed to sell their produce at market prices, but since then, they have fallen behind as the government has shifted emphasis to industrial and urban growth.
This is a sensitive area because when the People's Republic of China was founded in 1949, the Chinese Communist Party branded itself as the party of soldiers, workers and farmers. For the period from its founding in 1921 until 1949, the party had its roots in the Chinese countryside. One of Mao Zedong's famouse quotes on guerilla warfare spoke about "using the villages to surround the cities".
When Jiang Zemin became president and put forward his "Three Represents" policy, that was dropped, and the party claimed to represent all "progressive elements of society", with the focus of development switching to the urban middle class.
Rural reform has been slow because most farmers do not yet have the right to buy and sell land, though this is changing in some areas. Another impediment has been corrupt local party officials, who tax and dispense justice largely without supervision from the center. While there have been many internal efforts at stemming party corruption, these efforts have not been methodical. Since they do not go far in the party hierarchy, there is little incentive for the local officials to change.
The reform of China's banks also means that all of them will lower the number of branches in rural China, as they seek to lower their portfolio of non-performing loans. Of China's four state-owned banks, the Agicultural Bank of China is the least healthy. Microlending has not yet been introduced in China except in certain small areas.
For this reason, the Chinese government has recently introduced incentives to get companies to invest in rural China, and expand growth into the hinterland away from China's eastern coast.
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