How far do you agree that urban rural division poses the greatest threat to

Chinas economic development?

Rural-urban division is a serious but not the greatest problem to Chinas
economic development. Although regional disparity could potentially
destabilize and limit the growth of Chinas economy, the problem itself is
however ameliorated by governmental policies and the shift of industrial
focus to the inland region. Besides, more serious and difficult challenges like
rising inflation and structural deficiencies have overshadowed regional
division as a threat to Chinas growth.
Urban-rural division can lead to social dissatisfaction and unrests unsettling
the stability that has afforded China its economic growth. Due to Chinas
unequal development policies that had let some get rich first, between
developed coastal cities and underdeveloped inland provinces, there is a
huge income gap. Rapid urbanization accentuates that difference in material
living standards such as education opportunities and medical benefit
between rural residents and urbanites. Coastal Chinas GDP is 8.5trillion yuan
in 2004, compared to 6.8trillion yuan, the combined GDP of the rest of China.
Gini coefficient for income distribution rose from 0.46 in 2005 to 0.477 in
2011 to 0.474 by 2012; and analysts still argue that the actual disparity is
much worst. Even with the economy achieving double-digit growth in the
aftermath of the 2008-2009 global financial crises, 200million Chinese still
lived in poverty at about US$1.25 per day. Given its severity, urban-rural
division may be a challenge to Chinas economic development.
Rural poverty, as a result of developmental disparity, is responsible for the
influx of migrants to the cities, resulting in the demise of Chinas agricultural
sector that has helped to sustain its economic growth. Dengs reforms
subordinated agrarian growth to Chinas industrialisation and urbanization
programs where countryside was primarily to support the cities with
affordable and ample food. Low income and inferior living quality in the
countryside have resulted in many peasants abandoning their rural
livelihood. Millions migrated to the cities while lands are untilled. This,
coupled with rapid urbanization in the inland provinces, has caused much
arable land to be wasted. Even for those that stayed back, as there are few
resources available for investment, agricultural productivity remains grossly
inefficient. Moreover, with many farmers preferring to grow cash crops over
food crops, the prices of food are pressured to increase as food supply
becomes scarcer, undercutting the low cost of food the Chinese economy
had leveraged on to grow.
Division in regional wealth has led to mass migration that strained the
capacity of cities, causing socio-economic problems that can impede Chinas
development. Slogans promoted by Deng such as Getting Rich is Glorious
and Poverty Does not Belong to Socialism have given rise to an eagerness to

migrate to cities to enjoy urban life. Since most human resources and capital
move from the poor regions to prosperous regions under the market
economy system, poverty in western China and ethnic minority regions is
increasing. As large numbers of migrant workers become second class
urban citizens, they are discriminated against and segregated from the rest
of the urban population, excluded from social insurance such as pension
insurance, unemployment insurance and health insurance leading to social
inequality. Obstacles placed by employers and urban authorities to exclude
poorer and less educated migrants from entering the primary labor market
also reduce their chances of upward mobility.
Regional disparity, hence uneven distribution of wealth, has impeded
sustainability of Chinas growth as it could not progress from a
manufacturing to a consumption-based economy. The implementation of
preferential policies in coastal provinces as early as the beginning of the
1980s has led to a rapid integration into the world markets, huge inflows of
FDI and the development of modern industrial sectors in these provinces.
Coastal cities provinces benefit from a higher percentage of arable land,
better conditions for developing infrastructure and easy access to sea. As
such, economic progress in China, substantial as it has been, is uneven and
concentrated in urban and coastal regions. In terms of GDP per capita, the
gap between the western and eastern regions increased from 378yuan in
1978 to 4895yuan in 1998. In 2001, of the 30provinces in China, the
3metropolitan cities of Shanghai, Beijing and Tianjin, had to highest per
capita GDP in current prices. The concentration of tremendous wealth in the
hands of the few, in the coastal cities, is an obstruction governments
promotion of a more consumption-based economy.
However, measures undertaken by the CCP government to ameliorate
regional disparity are beginning to show results, thereby possibly limiting its
impact on Chinas economic development. For example, government has
instituted preferential policies for the development of the western regions
included more investment, preferential tax rates and greater flexibility in
development policies. In 2003, China invested about US$24.3billion in
infrastructure projects in the western regions, amounting to 55.2% of the
countrys total annual investment in the region. Instead of promoting the
Western Region as a labor intensive manufacturing region, the government
placed the focus on creating new industries and environmentally friendly
technology to exploit natural resources in the western region. Large scale
infrastructure projects such as Qinghai-Tibet railway project and natural gas
pipeline project aim to help in reducing geography-related constraints such
as roads and railways might help in reducing transportation costs.
Preferential policies implemented to help the declining agrarian sector have
also helped to contain some negative repercussions of urban-rural divide on
Chinas economic development. the government has vowed to keep at least

120million hectares of arable lands for agriculture. From 2008, China is also
purchasing farmlands on parts of Africa to grow its food. Foreign food
purchases are made from countries like Australia and Brazil. Number One
document, a direct subsidy and elimination of taxes for the peasants, has
increased the amount of subsidies given to peasants sharply. Government
also encourages township enterprises to increase revenue for the farming
families. This is generally beneficial for participating localities. Subsidies for
rural residents have been given out to spur their consumption ability and for
the purchase of household appliances especially during the 2009 global
financial crisis.
Stress on Chinas development by the problem urban-rural divide, is also
lessened by the shift in manufacturing gravity from the prosperous coastal
cities to the inland provinces. The Chinese government has allocated more
infrastructure investments and international development agencies loans to
the central and western regions. Developmental efforts in Shaanxi, Sichuan,
Chongqing, Yunan and Xinjiang have also been accelerated. For example, in
2003, China investment US$24.3billion in infrastural projects in the western
regions, amounting to 55.2% of the countrys total annual investment in the
region. Eight key projects were completed by 2003, including three road
construction projects, an airport extension in Shaanxi Province and four westeast electricity transmission projects.
Urban-rural divide could not be the greatest obstacle to Chinas development
as it is overshadowed by other challenges such as inflation and structural
deficiencies of the Chinese economy. Inflation has cropped up as a serious
problem in recent years, partly due to the excessive liquidity within the
economy and partly caused by some structural factors. Chinese inflation is
made up of elements comprising both a demand-pull and a cost-push type,
further complicated by seasonal price fluctuations and imported inflation.
The economy has also become so open and globalised that it becomes
susceptible to imported inflation, especially when the government has been
reluctant to speed up yuan appreciation. SOEs remained inefficient and
unprofitable. They are responsible for a large part of Chinas bad debts and
industrial overcapacity. The privileged entrenchment of SOEs has resulted in
their monopolization of resources and capital at the expense of stifling
growing private enterprises. Corruption and wastage of resources are rift.
In conclusion, regional disparity could potentially destabilize and limit the
growth of Chinas economy. However, the problem itself is however
ameliorated by governmental policies and the shift of industrial focus to the
inland region. Hence, urban rural division does not pose the greatest threat
to China in terms of severity as it is not irreparable unlike other more deepseated problems.