China's rural transition

Roughly half of China's population is still rural, living in villages and towns and dependent primarily on farming. In 1985 that percentage was about 76%, so there has already been a massive transformation of China's economy and society towards greater urbanization. (Albert Nyberg and Scott Rozelle treated this process in an important World Bank publication, Accelerating China's Rural Transformation.)

There are two basic processes through which urbanization can occur. Rural people can migrate to cities, or cities can grow up around rural people. Both processes have been underway for thirty years in China. Estimates vary, but approximately 210 million migrants work in Chinese manufacturing and construction industries, and the vast majority of these men and women are from rural origins. The percentage of migrant workers in urban industries is staggering; W. K. Chan reports in Wuhan, for example, that 43% of manufacturing workers and 56% of construction workers are non-Hukou migrants (link).  But almost all of China's cities have also sprawled out into their peripheries, into what was previously farm land and villages. This is true in Shanghai and Suzhou, Wuhan, and hundreds of other major cities.

The "urban development" part of the story has forced displacement of farming villages from their land, as farm land is absorbed into factories, power plants, development zones, and other urban uses. This is one of the most potent sources of protest in China today. Some portion of that population finds employment in the industries that follow this development -- in the vast assembly plants of Foxconn, for example in at least nine cities in China. (Foxconn was actively recruiting thousands of workers in Chengdu during a recent visit there.)  Another portion is subsidized for some period of time by the government in compensation for the loss of their farm land and occupations.

In the medium term, Chinese agriculture is shedding workers, and the rest of the economy needs to grow enough to employ this part of the population. This is part of the urgency that policy makers feel for sustaining very high rates of economic growth.

One portion of the population that is least likely to make a smooth landing in the new economic conditions is the elderly. China faces a major social issue in a growing population of aging farmers, and the circumstances of this group are predictable: in need of health care, short on pensions, and often separated from their children who have migrated to better conditions in cities. (Here is a World Bank report on this subject; link.)

So my question here is a simple one: what is the theory of rural-to-urban transition under which the Chinese leadership is operating? There are a range of possible theories:

• Help employment in industrial and construction activities grow as fast as workers and farmers are expelled from the rural economy, so their standard of living rises overall.
• Grow rural industry and high-value specialized agriculture so rural people can remain in place.
• Plan for an extended time during which a much more extensive social safety net will be provided in the form of income supplements, subsidized healthcare, and retirement income until "surplus rural population" can be absorbed by the urban economy.
• Hope for the best and trust to market-based adjustments.

There is a rural development strategy that would actually make the problem more acute:

• Stimulate rapid improvement in the productivity of agriculture. As a unit of rice is produced more productively, it requires fewer units of labor. So the net result of productivity improvements in agriculture is a drop in rural farm-based employment even as it increases income to the individual farmer.

Here is one answer to the question of theory of rural transition that is based on Chinese government policy thinking in the late 1990s. The following analysis is contained in the Nyberg-Rozelle 1999 World Bank report, Accelerating China's Rural Transformation, based on close cooperation with the Institute of Rural Development in the Chinese Academy of Social Sciences. This close collaboration suggests that it intends to express then-current ideas about strategy and policy within the Chinese government.

Since the founding of the People's Republic, the leaders of China have been preoccupied with one overarching goal; the modernization of the nation. Our [Chinese] vision for the early part of the 21st century perceives the rural economy as an integral part of this modernization effort, with equitable increases in income, and the elimination of poverty, achieved in large part by transferring rural labor to the urban−industrial economy—all accomplished in an environmentally sustainable manner. We envision an enormous government effort in transforming its role into an investor for public services and goods and fostering a market environment—enabling individual farm and nonfarm producers, consumers, and traders to make more efficient decisions and improve their welfare. 

In pursuit of this vision, two issues remain central to the government's rural development objectives: food security and poverty alleviation. China has made remarkable progress in meeting these goals; the economy, including the rural sector, has grown at phenomenal rates during the reform period. The growth of food supplies has exceeded the growth of domestic demand and China exports horticultural, livestock, other agricultural, and aquacultural products. The growth of rural industry has been an important element of recent growth as the rural economy continues to diversify. Increased productivity and income growth have reduced the massive pre-reform poverty problem, improved the standard of living of most residents, and launched the structural transformation of China from a traditional rural to a modern society.

This summary involves some of almost all the options mentioned above -- improvement of farm productivity, growth of urban jobs, growth of rural industry, and establishment of a more extensive safety net. In practice, however, it seems that the government has given the greatest emphasis in its economic policies to the growth of urban jobs and out-migration from the rural sector.

In their 2003 report "Scenario Analysis on Urbanization and Rural-Urban Migration in China", Shenghe Liu, Li, and Zhan (researchers at the Institute of Geographic Sciences and Natural Resources Research, Chinese Academy of Sciences) summarize Chinese policy thinking on the rural question in these terms:

It has become a common consensus that the most headachy “agriculture, farmers and rural areas” (three nong) problems in China are unable to be solved by farmers themselves, inside the agriculture sector and rural areas. Promotion of the urbanization process is needed to help more rural surplus labor forces seek employment in non-agricultural activities and in cities and towns, serving the purpose of reducing the agricultural population, improving agricultural productivity and increasing the farmers’ income. In summary, reducing rural population through active promotion of urbanization is considered to be the only best way to make farmers rich. Thus, the prospects and scenarios of China’s urbanization and rural-urban migration are bound to have tremendous impacts on its agricultural development and policy making.  (link)

Or in other words, Liu, Li and Zhan reiterate the idea that rural-to-urban migration is a key part of Chinese policy for improvement of income and wellbeing in the rural areas.

Here is a short clip summarizing a study by the Institute for Rural Studies at Central China Normal University, finding that the Gini coefficient in the countryside has increased significantly. It also makes the point that a very large component in the growth of rural incomes is remittances from migrants who have found higher-paying jobs in manufacturing and construction.



Here are some resources available on the web on the subject of rural transformation in China.  A very useful treatment of the issue is Francis Tuan, Somwaru and Diao's working paper for the International Food Policy Research Institute (link). Scott Rozelle et al have a very useful paper, "The Evolution of China's Rural Labor Markets during the Reforms," that focuses on the opportunity and challenge of increasing non-farm labor in rural areas (link). A useful resource on urban-to-rural migration is a slide presentation by Kam Wing Chan from 2008, "Internal Labor Migration in China: Trends, Geographical Distribution and Policies" (link). Chan is also the author of Cities with Invisible Walls: Reinterpreting Urbanization in Post-1949 China.

Chinese authors are writing about the human side of these transformations -- rural poverty, migrant insecurity, the difficulties of urban life for poor people. Here is a book by Xin Zhang, whose title is loosely translated by a friend as An Analysis of Social Classes in China. I wish I was able to read it.