World - Bridge Urban-Rural divide;China told

Ananth Krishnan


Disparities restricting consumption, says UNDP report

Fall in rural poverty rates commended

SHANGHAI: A U.N. report released on Sunday warned China needed to improve public services in rural areas or the country risked compromising the “stunning” economic progress it achieved after three decades of economic reforms.

The U.N. Development Programme study, one of the most in-depth assessments of social services in rural China, found that increasing disparities between rural and urban areas in household incomes, healthcare, education and social services were restricting consumption and reducing productivity.

“The inequalities that have emerged during rapid growth have widened to levels that pose additional obstacles [to development],” the report stated.

“If poor households do not have access to affordable public services of good quality… the great gaps in basic public services and the disparities in human capital that they engender may create permanent divisions that are difficult to reverse.”

The study, the first released after the global financial crisis, also cautioned that because of “new risks arising in the global economic environment” that saw a declining role for low-wage manufacturing, the provision of basic public services in rural areas would become “central to continued sustainable economic growth.”

In the first half of the year alone, more than 67,000 factories in China’s provinces have closed down, with falling overseas demand for Chinese goods. The government has struggled to pay unemployment benefits for thousands of laid-off workers.

The government passed a $586-billion stimulus plan on November 9, listing a number of rural infrastructure projects in an effort to revive a slumping domestic economy. The U.N. report did acknowledge the significant progress made in dealing with rural poverty since the reforms initiated by Deng Xiaoping three decades ago. Rural poverty rates had fallen from 30.7 per cent in 1978 to just 1.6 per cent in 2007.

While social security, healthcare and education had all improved in urban areas, many rural areas were falling behind.

In the provision of education services in particular, inequalities were pronounced. The study found the average funding for a student in Shanghai was 10 times that of a student in rural areas of poorer provinces like Henan. One reason for the disparity is the government’s registration system, which discourages the migration of people across provinces, according to Lu Ming, an economics professor at Shanghai’s Fudan University.

Under the current ‘hukou’ registration system, people can only receive welfare benefits in provinces in which they are registered. Millions migrate from rural areas to cities every year in search of work, and in doing so they lose access to healthcare and social security.

“The biggest problem is if you do not have ‘hukou’ you are simply not equally treated when it comes to social security, education, medical care and housing mortgages,” said Mr. Lu, adding: “But the central government has taken measures to ease these restrictions, and has also instructed urban areas to prepare better systems for social security.”