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Disparity between Rural and Urban Areas Linked to Government Policies

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Since China implemented its economic reform policy, the standard of living for many of China’s farmers has improved. However, the economic disparity between the city and countryside still exists.

In recent years, the difference between income levels for urban and rural populations has continued to increase. In general, observers believe that this is caused by government policies. Whether the Chinese government will change the policies or make them more effective remains unknown.

Chinese President Hu Jintao and Premier Wen Jiabao indicated their intention to resolve the problems with agriculture, the countryside, and the farmers. However, observers have pointed out that the root cause for the slow rural economic growth and for the second-class citizen status of China’s farmers is government policies that have remained unchanged for quite some time.

Hong Kong observer Liu Sanchan said, "Chinese society has a two-dimensional structure. For so many years, it has basically deprived the farmers of the support required to realize industrialization. Farmers must pay a tax to cultivate land and pay tax on their income. It is only recently that high income urban residents have had to pay taxes and, for many years, workmen did not have to pay any taxes.”

The Chinese government has long had a policy of buying agricultural products at low prices, then selling industrial products to farmers at high prices. Consequently, farmers have remained impoverished. Many cannot earn enough to support their families through the year.

Since China implemented economic reform 25 years ago, farmers’ income has shown a substantial increase only once. Since the mid 1990s, the rate increase has slowed down, with some areas experiencing negative growth. Statistical data obtained by the Chinese Academy of Social Sciences this year indicates that the economic disparity between the rural and urban population continues to widen, and has now reached the ratio of one-to-3, that is, the income of rural residents is only one third that of urban residents.

Chinese economist Mao Yushi said, “Presently, poverty is concentrated in the countryside. There are many causes for this; some are natural causes, and some are policy related."

Mao said that the natural causes of rural poverty include the underdeveloped transportation and trade in some areas, as well as high transaction costs. In those rural areas, the economy lags behind that of coastal areas.

Mao added that rural poverty in China is also undeniably due to government policy. This is because after 25 years of economic reform, state investment is still determined by the government, and the current policy puts rural areas at a disadvantage.

According to Mao, “From a policy aspect, reform monies have mainly been spent on cities. The farmers’ savings should have been used to develop the rural economy. But the reality is that the deposits from all citizens, including the farmers, have been given to the cities and used to construct high-rise buildings, airports, and highways, etc. Rural areas have been deprived … and have had no way to develop."

Since the beginning of economic reforms, Chinese leaders have repeatedly stressed the need to resolve the problems with the agricultural sector and farmers. After President and CCP Central Committee General Secretary Hu Jintao and Premier Wen Jiabao came to power, they issued the No. 1 Document of the Central Committee of the CCP and the State Council in 2004, which proposed to resolve the problem of the longstanding delay in increasing farmers’ income.

Since taking office, Hu and Wen have shown concern for farmers and for China's weaker communities. Compared to the efforts of leaders in the past 50 years, can these two new leaders fundamentally improve the farmers' conditions?

Mao Yushi said, "It is not yet clear at this stage. Of course I believe these two leaders subjectively are more concerned about farmers than previous government officials. I have such a feeling, but having such an intention does not necessarily mean they can accomplish it. Because policy making is a complicated issue, not everyone who wishes to accomplish something can actually achieve it. Sometimes you may want to do something, but you make mistakes and end up with exactly the opposite of what you intended. "

Mao further said that the Chinese government is proposing to financially subsidize grain production to increase farmers’ incomes. He believes that this policy may not be suitable for economic development in the long run. He thinks that China should reform the investment policy that is putting rural economic development at a disadvantage and should invest vigorously in rural education.

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