Tasks at the new stage of rural development

Change the bifurcated urban-rural social structure and vigorously promote urbanization. Over the past 20 years, China has carried out reform and opening up, and achieved great success. But the bifurcated urban-rural social structure and the household registration system formed under the plarmed economy have been kept for too long, and few reforms have been made. Two problems have arisen from this. First, it has obstructed the flow of resources in the society, made urbanization seriously lag behind industrialization, and caused imbalance between the economic structure and the social structure. Second, it has hindered the fonnation of the socialist market economic system. The existing bifurcated social structure of rural and urban division has meant that the essential production factors, such as laborers, land, capital, and multiple resources, cannot flow according to the requirements of the market economy. It has hindered the rational allocation of resources and is unconducive to the development of productive forces.

The practice over the past two years has shown that if more than 800 million fanners are confined to the countryside, they will not be able to get rich, and neither will the countryside become modernized. This has also affected the progress of urban modernization. The countryside cannot accommodate more than 500 million laborers. According to China’s cunent level of agricultural production, 150 million laborers are enough to guarantee the production and supply of agricultural products and meet the needs of national economic development and the whole society. Setting up township enterprises has been a success, absorbing 100 million laborers. However, leaving the land but not the home village is not correct. Engaging in both agricultural and industrial production ('TliTix.) will not be desirable in the long run. It is not conducive to specialization and the improvement of the quality of the workforce.

Township and village enterprises are mainly engaged in the secondary and tertiary industries, and should be concentrated in small towns and even cities at a certain stage. Therefore, it is an inevitable requirement for economic development until today to open the gates of towns and cities and let farmers in with confidence. Adjusting the economic and product structures within rural areas will not achieve the anticipated results, no matter how hard one tries. The adjustment of the social structure should proceed strategically and go beyond agriculture and rural areas. We should change the current situation of China being both an industrialized country and a peasant (absolute majority) society by letting a considerable number of farmers become urban residents and workers in the secondary and tertiary industries. Such adjustment has been proven by the practice of various countries, and is consistent with the general pattern of historical development. This is true in countries with fewer people and more land (such as the United States and Canada), as well as with countries with more people and less land (such as Japan, Korea, and Western European countries). One of the 10 indicators of modernization proposed by the American professor Alex Inkeles and recognized by the international sociological community is that in a modernized country, the agricultural laborforce should not exceed 30% of the total labor force in the country.

The household registration system has reached the point that it must be changed. The household registration system which creates the urban and rural separation is the main obstacle that confines fanners to rural areas. Since the reform and opening up, voices calling for the reform of this rigid system are increasing. Since the 1990s, departments of public security, institutional reform, and civil affairs have held many meetings to discuss the drafting of plans for reforming the present irrational household registration system. But no reform scheme has ever been put forward since it involves the interests of urban areas, various departments, and strata, and faces the problems of different understandings arising from them.

In the late 1980s, especially under the trend of great economic development after 1992, going along with the needs of urban development, a large number of fanners flocked to cities to work and do business, creating enormous amount of wealth for the cities where they reside. The work they do is the heaviest, hardest, and most dangerous, but their wages and labor insurance benefits are very low. Practice in various regions has proved that the economic prosperity of a region is directly proportional to the number of migrant workers employed. But because of the restrictions of the household registration system, migrant workers who have worked in the cities for over 10 years are still migrant workers, no matter how hard they work and how well they perform. As soon as there are political and economic disturbances, migrant workers are the first ones to be laid off. With the economic readjustment in recent years, the number of migrant workers has been reduced to less than 50 million. Recently, Beijing, following Shanghai, issued a regulation limiting the use of migrant workers in 103 occupations. At the most, the number of migrant workers in Beijing amounted to 3.3 million. Now there are fewer than 2 million. In recent years, China has clearly accorded national treatment to foreign and overseas workers and businessmen. Why should we often apply the policy of favoring some and discriminating others to our fellow countrymen? This is obviously not in line with the requirements for the development of the market economy.

Over the past 10 years, tens of millions of migr ant workers have made great contributions to the cause of socialist modernization, and also paid a hrtge price. Some work units that employed migrant workers ruthlessly exploited them economically and treated them harshly. Taking the country as a whole, handling such a huge workforce with a recruitment method that makes them come when called and go when unwanted can neither build up a well-trained, skilled, and disciplined workforce, nor produce the cadres required. As migrant workers live a life of migrant birds, their mobility is disorderly, irregular, and unorganized, inevitably causing all kinds of social problems, putting great pressures on the departments responsible for transportation, public security, and civil affairs, and making them pay very high social costs. The tide of migrant workers makes it clear that the

A new situation and new tasks 35 household registration system has come to the point where change is no longer optional.

Change the situation of “urban-rural separate governance and one country, two policies,” and build a unified socialist market economic system. Since the 1950s, China has gradually built up a system of planned economy and introduced separate urban and rural governance and one country, two policies

In many areas, one policy is implemented in cities and another in the countryside. Over the course of decades, it has gradually solidified. This together with the household registration system and the system of status as the distinguishing criteria give rise to the pattern of one country, two different policies.

In the economic sphere, with respect to ownership and patterns of circulation and exchange, distribution, employment, and taxation, the policies towards urban residents and fanners are all different. Take employment, for example; before the reform, the government assumed full responsibility for the employment of the urban labor force, but when it came to the rural labor force, those who had land were regarded as being naturally employed. The government made no arrangement. The labor authorities of the government dealt only with the employment of the urban labor force, and had no function for managing and providing employment for the labor force in rural areas.

In the social sphere, in terms of education, health care, labor protection, social security, pension, and welfare, the policies for urban and rural areas were also different. In education, for example, so far as the nine-year compulsory education was concerned, the educational facilities of primary' and secondary schools in urban areas were established by government funding, whereas the educational facilities of rural primary and secondary schools were to be built by fluids raised in the villages. Hence, educational fund-raising became a great burden for fanners.

Electric power, roads, water supply, postal service, and telecommunications were owned by the whole people and directly managed by the relevant departments of the state. But here, as well, two different kinds of policies were implemented in urban and rural areas. For example, power supply lines and facilities at the levels of administrative villages and below were built by funds raised in the villages. Fanners had to pay themselves to bring electricity to their homes. The different ways of managing urban and rural affairs were also reflected in the prices of electricity. Same electricity, but different prices. Fanners had to pay to bring electricity home, and the electricity price they paid was several times higher than that in cities. The issue of electricity pricing has caught the attention of relevant departments. In recent years, large-scale upgrading of rural power grids has been carried out in the countryside, in an effort to create the conditions for solving this problem. For another example, in sectors such as water supply, road traffic, postal service, and telecommunications, the same strategy of “one country, two policies” was adopted. The result was that, on the one hand, fanners paid more money and suffered fr om the policies, and, on the other hand, the development in these undertakings was restricted.

The urban and rural administrative divide and one country, two policies was formed step by step under the centralized planned economic system. The statethen needed to concentrate its efforts on industrialization. There was no alternative but to adapt to the shortage economy at that time. But this was done at the expense of fanners. This system of separate governance confined fanners to the countryside, suppressed their initiatives, and caused stagnation in agricultural production, leading to more shortage in the shortage economy. As a result, the more serious the shortage, the more emphasis was laid on the system of separate policies in urban and rural areas, forming thereby a vicious circle. After the reform and opening up, rural areas took the lead in the reform, which aroused farmers’ enthusiasm for production, gr eatly promoted the development of agricultur al production, and solved the supply problem of agricultural products. But later on, when the reform came down to the interest relations between urban and rural areas, it met with great difficulties. Some scholars have pointed out that cunent agricultural problems lie outside of agriculture. Rural problems lie in the cities. To solve the problems of agriculture and rural areas, we must go beyond agricultur e and step outside of rural areas. The system of “separate governance in urban and rural areas and one country, two policies” must be changed.

The 3rd Plenary Session of the 14th CPC Central Committee explicitly proposed to build a socialist market economy. From the practice of recent years, the transition from the planned economy to a socialist market economy has become the general trend. Practice in various countries has proved that in order to build a market economic system, the pattern of urban-rural separation, departmental segmentation, and regional blockades must be broken. Only in this way can we build a large and unified national market.

However, we still face the problem of “separate urban and rural governance and one country, two policies” at present, which is obviously not conducive to the construction of a socialist market economic system and to the creation of a large rmified urban and rural market. We must be determined to remove the obstacles in our understanding and interest patterns and continue to deepen the reform. We must gr adually eliminate all kinds of barriers between urban and rural areas and realize the integration of urban and rural industrial structures, setting up an industrial structure system with both reasonable division of labor and coordination. We should gradually realize the integration of the labor market, so that urban and rural labor forces can break the bonds of status and flow smoothly, human resources can be most reasonably allocated, economic benefits maximized, and a new generation of high-quality labor force be created. We should gradually set up an integrated national system of urban and rural education and strengthen the basic education, so that excellent young people in urban and rural areas can receive good education and training. In terms of electric power, transportation, postal service, telecommunication, and water supply, integrated urban and rural networks and systems should be built up step by step, so that social mobility and the flow of logistics and information between urban and rural areas across the country can happen unimpeded. We should, step by step, build up an integrated urban-rural social security system and gradually change the current completely different modes of social security in urban and rural areas. Needless to say, the social security system of “one country, two policies” has been formed gradually over the past decades, and it is very difficult to reform it, but the goal of an integrated social security system for both urban and rural areas should be made clear, and the two different systems should be gradually connected and drawn close. The two systems can no longer be built separately along the line of the urban-rural divide. A unified national social security system is not only a guarantee for the long-term peace and stability of the country, but also a guarantee and driving force for the modernization of agriculture.

Overcome the two currently existing non-benign cycles of unbalanced supply and demand of commodities, and the troublesome relationship between urban and rural areas; we can still draw on the successful experience of getting out of economic difficulties by first activating the rural market in the early 1980s. In recent years, China’s economy has witnessed the problems of a sluggish market, declining economic growth rate, continuous fall of prices, and deflation. Although the government has adopted a proactive fiscal policy, the effect is still not notable. The reasons are certainly manifold. The purchase power of fanners who account for 70% of the total population is decreasing year by year since 1997. Instead of expanding, rural markets are shrinking with each passing year, which has led to the erosion of the basis for the development of the market and industry. In my view, these are the main problems encountered in today’s economic development. It can be said that we are suffering from the “urban-rural syndrome.’’ Therefore, it will be difficult to solve the problems if we talk about urban development only in terms of cities and the development of industry only in terms of industry. Moreover, some measures taken have been detrimental to rural development.

At present, there are two negative cycles in China’s economic and social life that are pressing on us. The first cycle is the imbalance between supply and demand of commodities. Currently, there is a general surplus of major industrial and agr icultural commodities, causing difficulties in sales, the sluggishness of the market, and the decline of enterprises’ willingness to invest. These, together with the reluctance of banks to lend, have led to a decrease of total domestic investment. Enterprises are stagnant, with insufficient operating rate, and wage expenditure decreases. Some enterprises have to lay off workers and even close down. A large number of employees lose their jobs, which eventually leads to the decline of residents’ purchasing power and consumption. Of the total products in China, 85% are purchased through investment and household consumption. Right now, there are problems with both of these aspects. Consequently, a large percentage of the total products cannot be sold, forming a negative cycle. The second cycle is the troubled relationship between urban and rural areas. At present, urban-rural interaction is trapped in a non-benign cycle. First came the urban economic recession. Commodities were piling up, and enterprises cut down the production and laid off workers. Local governments discriminated against migrant workers. Due to the excess production capacity of some commodities, the government proposed to close, merge or transform 15 small industries. Small industries in rural areas were the first to bear the brunt. According to the statistics of the Bureau of Township and Village Enterprises, 55,000 such enterprises in 11 provinces (cities) were forced to shut down through administrative means dining the first half of 1999.

Millions of rural migrant workers returned to the countryside. With the fiscal and tax reform in recent years, power and finance are centralized. The financial resources and income of provincial and prefectur al governments and above have been strengthened and increased, whereas the financial situations of the counties (county-level cities) and below, especially townships (towns), are generally difficult, which aggravates the burdens of fanners and rur al enterprises. Therefore, in recent years in rur al areas, higher agricultur al output has not been accompanied by higher income. Township and village enterprises are declining, and migrant workers are returning to their home villages. Tax burdens become even heavier. Rural economy runs into difficulties. With rural economy in recession, fanners have no money to purchase means of production and daily necessities, their purchasing power declines, and rural markets shrink. Neither do fanners have money to go to cities for shopping and consumption, which further aggravates the urban recession and leads to the non-benign cycle of urban-rural relations.

These two negative cycles are, of course, interrelated. In the final analysis, they boil down to just one, namely at the new stage of economic development, a relative overcapacity in agricultural and industrial production is accompanied by inadequate investment and consumer demands in urban and rural areas, in this way forming a vicious circle. What I want to emphasize is that in China at the present stage, the number of surplus laborers is particularly large, the shortage of funds particularly serious, and the gap between urban and rural areas particularly wide because of the long-term implementation of “separate urban and rural administration and one country, two policies.” The problems in these three areas have been exacerbated by the improper urban and rural policies in recent years. How can we break these two negative cycles and get out of the cim ent economic slowdown? Our experience of solving the economic problems and opening up a new situation in the early 1980s are worthy of reference - only, the problem then was how to accelerate the development of productive forces and solve the problem of the overall shortage of agricultural and industrial products, while our problem now is to stimulate demand and solve the problem of surplus industrial and agricultural products.

In the early 1980s, the basic policy and measures we adopted were, among many contradictions, to first solve rural problems and cany out reform in niral areas. In the face of financial difficulties, the purchase prices of agricultural products were raised substantially to arouse the enthusiasm of fanners who accounted for 80% of the total population. With years of good harvest, the food problem was solved in just a few years. Fanners became rich first, their purchasing power increased greatly, and the rural economy was enlivened, which also led to the prosperity of the urban economy and greatly promoted the development of the national economy as a whole.

Now we are once again facing the problem of stagnant urban and rural markets. From a comparative prospective, we can still draw on the experience of first invigorating the rural market. Fanners account for 70% of the population. We should bring into full play the initiatives of fanners through appropriate policies and create a dynamic and prosperous rural market by greatly increasing their consumption and investment capacities. In this way, the start-up investment will not be much. Rural areas are a market with great potential, but it requires painstaking efforts to foster and develop. First, proper policies should be adopted, and second, start-up investment should be made.

A few years ago, authorities concerned already put forward the proposal to develop the rural market and expand domestic consumption, but it was only a verbal and paper discussion with no proper follow-up policies. The result was discussion without action and noticeable effect. Not long ago, professor Lin Yifu from Beijing University proposed that:

the government should use financial power to launch a new nationwide rural movement with the focus on bringing safe drinking water and electricity to rural areas, expanding and upgrading rural road networks to speed up the construction of rural infrastructure, through which to further stimulate domestic demand and get out of the economic difficulties.

Professor Lin’s proposal is very valuable. He pointed out the essence of the problem and the way to solve it.