According to China’s Ministry of Agriculture, the urban-to-rural average income differential last year was about 9,600 yuan (Approximately US$ 1400), the largest in the last 30 years.
Sun Zhengcai, Minister of Agriculture, disclosed on August 28, 2008, that the per capita income of the rural residents increased significantly in 2007 compared to that in 2006, but the rate of change is still less than that of the economy and urban income per capita. Sun stated the gap between rural and urban income is in fact increasing. In 2007, average urban income per capita was 3.33 times that of rural income- it was 3.28 in 2006- and the absolute difference was 9,646 yuan.
Professor Chu-Yuan Cheng from Ball State University in Indiana believes there are several reasons that the gap continues to increase. “In the past couple of years, the urban economy developed faster than the rural economy for one, because foreign trade increased. And two, the stock stock market in Shanghai went up to 6000 earlier this year (2008) and many became rich in the cities. The rural population went to the cities for better jobs and left the elderly and women in the rural areas,”.
Eighty percent of 1.3 billion Chinese live in rural areas. Declining industries in rural towns also contribute to the slow economic growth, according to Zheng. “Many years ago, there were many small industries in small towns. They gradually withered because the machinery and modernized industries in the cities do a better job for less cost.”
Residential Registration Roadblock
Xie Tian, professor of the College of Business Administration at Drexel University in Philadelphia, believes the problem lies within China’s residential registration system, where the rural population is discriminated against, “In China, one is registered as a rural or urban resident depending on where one was born. But this registration system does not allow the relocation of the work force. By discarding this system, it will naturally remove the difference between rural and urban areas. If people who makes less money in rural villages can go to the cities, this gradual process will reduce the rural-urban gap.”
Professor Xie believes that China would be able to solve the problem by abolishing the residential registration system. “Why keep the registration system? It’s an issue of not having true privatization. First of all, if China abolished the registration in rural areas, then it would lose control over the bottom levels of government, such as the county, township, and district in rural areas. The Communist regime does not want see that happen. Secondly, if urban residents can circulate freely without registration, then the government would lose control over urban residents moving between cities. Hence the bottom line is, to better retain political power, the regime needs to keep its right to monitor people and control where they live. If the population in cities can circulate to rural areas, then there comes the issue of land ownership. In China, there really isn’t any true protection for private property rights.”
Professor Xie is also concerned about the poverty among villagers, “The large urban-rural gap has existed for a long time and the problem was never solved. If the gap continues to grow and get larger, the real income of poor villagers will become even less.”
Another official figure shows the average income of Chinese farmers was 3300 yuan (approximately US$ 481) per capita in the first three quarters in 2007. In 2008, according to Sun, the uncertainties have increased and it’s harder for farmers’ income to increase faster. The revaluation of the yuan resulted in higher costs for export industries along the southeast coast of China and has caused the beginning of a reduction of production. There will be fewer employment opportunities for rural workers.
Possible Future Improvement
When predicting this coming year’s urban-rural gap, professor Zhang said the situation may change, “The stock market nose-dived from 6000 to about 2000~3000 points. The urban income will decrease. Also, the real estate market isn’t as good as last year. Hence the gap will not be large. Another factor is, the prices of agriculture products have gone up, and so will the peasant’s income.”
