The widening economic divide between rural and urban China — and between its coastal and western regions as well — will only get worse as its spectacular economic growth continues, a Chinese scholar warned at a recent symposium in Tokyo.
The worsening poverty of China’s rural farmers has been complicated by water shortages and other environmental threats confronting the country, said Yuan Gangming, a professor with the Institute of Economics at the Chinese Academy of Social Sciences.
At symposium held Sept. 20 by the Keizai Koho Center on the theme of the “sustainability of the Chinese economy,” Yuan brushed aside widespread concern that China’s economy is overheating.
Even though China’s gross domestic product has expanded at a rate of 11.5 percent in the first half — roughly the same pace as in 2006 — Yuan said he believes the speed of its growth is “appropriate” from a long-term perspective.
Not as hot as it looks
Most of the sectors that expanded rapidly in the past four to five years — such as steel, cement, aluminum, electricity, coal and nonferrous metals — are simply making up for the low or even negative growth seen in their output until 2002, Yuan said. These are the sectors where serious supply shortages occurred between 2003 and 2005, he said, justifying their rapid rise in output.
Yuan noted that investment in the first half of 2007 grew 26.7 percent — the slowest pace in the past five years.
‘Bubble elements’ loom
One source of concern, Yuan noted, is the sharp increase in liquidity caused by China’s huge trade surplus — an issue that contributed to Japan’s bubble economy in the late 1980s.
Today, the amount of renminbi in circulation following conversion from foreign currencies earned by exporters accounts for 28 percent of the money supply — up from less than 10 percent just several years ago, he said.
While China’s real economy is often noted as overheated, this high liquidity has led to sharp rises in real estate prices and the stock market, which many describe as reminiscent of Japan’s asset-inflated bubble, he said.
Still, these “bubble elements” will be manageable because they are being closely monitored by the government and academia, which have learned the lessons behind Japan’s past mistakes, Yuan said.
Wealth gaps, poverty loom
A more serious concern regarding the sustainability of China’s economy, Yuan warned, is the worsening poverty in rural villages and in China’s central and western inland regions. These villages and regions, he said, have failed to reap the benefits of the “narrow-based” development focusing on the coast of eastern China.
The wealth gaps are a serious problem that will get even worse as China’s rapid growth continues, he said. Such contradictions will become even more evident if the country maintains policies from the past 30 years that let certain areas precede others in economic development. The inland villages are becoming increasingly unhappy that poverty in some areas is even worse than it was before the reforms began in the 1980s, he noted.
Today, an average urban resident in China earns 3.22 times more income than his or her farm village counterpart. This gap is certain to expand in coming years because the urban income jumped 14 percent in the first half of 2007 — or double the maximum 7 percent growth seen by rural residents, Yuan said.
A similar divide is evident between east and west, with per capita GDP in the coastal areas of the east 2.55 times higher than the inland regions of the west.
While Beijing has launched major projects to promote inland development, the amount of resources spent on these efforts is far below what is being used to develop the coastal parts of the country, he noted.
Farmers’ world rocked
Yuan cited a field study he conducted in Yongjing County, Gansu Province, in northwestern China, where the per capita net income of farmers in 2005 was 1,345 yuan, or less than half of the national average.
At one point in the 1980s, the county was hailed as a promising area for industrial development that produced steel and nonferrous metals. After paying the price of industrialization, its farmers today are poorer than they were 20 to 30 years ago, he said.
The farmers who were forced to relocate to Yongjing’s mountains by the huge hydroelectric power plant built on the Yangtze River lost their livelihood because the new land isn’t as arable and they were unable to get water. Today, many of them travel to urban areas on the coast to get jobs, but much of their income is spent on transportation, he said.
Their poverty can only be solved by resettling them to areas where they can farm. But the cost of resettlement — at least 10,000 yuan per person — is far beyond the reach of the average farmer, even with financial support from the government, Yuan noted. Yongjing County alone has 30,000 residents who need to be relocated to survive, he said.
Even though the government in Beijing has started putting emphasis on rural development, it will take much more time before the rural-urban divide can be properly addressed because a majority of the people involved in China’s policymaking process still believe the nation can’t afford to tackle poverty in the rural areas at the expense of further development on the coast, Yuan said.
During the symposium, Hideaki Koyanagi, director of the Beijing office of the Institute for Global Environmental Strategies, noted that rural poverty in China is closely linked to its environmental problems.
In the process of its postwar industrial development, Japan also had serious environment problems, such as air and water pollution. But the challenges facing China today are far more serious because of the sheer scale of the pollution and because there are many more diverse threats to tackle, including global warming, desertification and drought, he said.