China's New Urban-Rural Divide and Pitfalls for the Chinese Economy

Abstract

This paper examines the widening urban-rural income gap inChina which has existed since 1985, and its implications for the Chinese economy. I argue that the decliningfiscal capacity of the central government and the ensuing central-local competition for revenues, a systematic urban bias in Chinesefinancial mechanisms, and the structural vulnerability of small peasant farmers in a transitional economy have all contributed to the growing disparity between urban and rural residents. The consequences of this growing urbanrural gap have begun to haunt the Chinese economy as it struggles to readjust fiom export-oriented growth to the boost of domestic demand. Cet article examine l'tcart deplus en plus grand qui existe, depuis 1985, entre les revenus des habitants des milieux urbains et ruraux de la Chine et analyse les rkpercussions de ce fosst kconomique sur l'tconomie chinoise. L'auteur constate que le dkclin de la capacitt fiscale du gouvernement central, la umcurrence qui s'ensuit en ce qui concerne les revenus, l'impamalitt systhatique dans les mtcanismes de financement et la vulntrabilitt des petitspaysans dans une tconomie en pleine transition ont contribut d tlargir le fosst entre les habitants des milieux urbains et ruraux Les constquences de cette disparitt commencent d hanter la Chine d l'heure oir le pays tente de redresser son konomie de sa croissance orient& vers les exportations et de la diriger vers la demande inttrieure. Qunjian Tian received his PhD from Cornell University and is assistant professor of government at Connecticut College, New London, Connecticut.Special thanks to Paul Pickwitze, Guang Lei and Wang Liping for their comments on an earlier version of this paper. I also want to thank two anonymous reviewers for their detailed comments. The views expressed here are solely mine.

The Impact of Catastrophic Medical Insurance in China: A five-year patient-level panel study

“…In addition, our study supports a growing body of evidence on policies that seek to mitigate rural-urban disparities in access to quality care, 23,24 which are exacerbated by differences in income and other economic outcomes. 25 Our study also points to a need for more targeted health care aid. Narrowing the gap between the coverage of employee and resident insurance is one step towards reducing illness-induced poverty and improving the security of rural Chinese livelihoods.…”

“…In addition, our study supports a growing body of evidence on policies that seek to mitigate rural-urban disparities in access to quality care, [23] , [24] which are exacerbated by differences in income and other economic outcomes. 25 …”

Urbanization’s effects on the urban-rural income gap in China: A meta-regression analysis

“…Developing countries commonly face the problem of a large urban-rural divide during the urbanization process, which has been recognized as one of those major differences between developing countries and developed ones (Fields, 1974;Sahn and Stifel, 2004). The urban-rural income gap (URIG) is defined as the gap between urban and rural household incomes, which is frequently used as an important economic indicator delineating urban-rural divide in many studies, such as Selden (1988); Carter (1997), and Tian (2001).…”

“…Although it has been declining since then, the overall trend is fluctuating and continues to be higher than its initial stage of the reform and opening up. This may cause serious social consequences for Chinese economy during rapid urbanization period (Yu et al, 2014;Tian, 2001). Therefore, understanding drivers of URIG has significant implications for research and policy .…”

“…These institutions have hindered the development of the labor market, for example, the household registration system has separated population and labor between rural and urban areas; the social security system has excluded rural residents from its welfare policy (Cai, 2007). The widening URIG is also considered to be caused by the urban-biased development policy, which extracts more than it invests in rural areas (Carter, 1997;Tian, 2001).…”