Tending to the grassroots

The convening of the third session of the 11th National People’s Congress (NPC), the annual meeting of China’s parliament, saw the government make public its responses to social and economic issues: Rising inflation, runaway property price growth and renminbi appreciation took center stage.

But beyond these headlines there was a notable shift toward tackling some long-term structural issues concerning sustainable growth, including rural economic development.

In a concerted and unprecedented move, 13 regional newspapers published an editorial advocating the abolition of China’s hukou system of household registration, which prevents migrant workers receiving the same social benefits as local citizens. The appeal appeared just days before the start of the NPC, where discussions were to be held on reforming China’s electoral law. Such reforms would grant representation of rural and urban residents in equal proportion.

In his annual work report to the NPC, Premier Wen Jiabao said that the government would step up spending on welfare and rural areas. "We will not only make the pie of social wealth bigger by developing the economy, but also distribute it well," he said, adding that US$104.9 billion would be spent on agriculture, rural areas and farmers.

Such utterances are part and parcel of Beijing’s long-term objective of maintaining "social harmony," but they also recognize the growing income disparity between urbanites and their rural brethren. The National Bureau of Statistics revealed that 2009 urban per capita net income stood at US$2,525, compared with rural income of US$754 – figures that state media claimed showed the widest income gap in 32 years.

That said, for all Beijing’s understanding of the plight of the more than 900 million people living in rural hinterlands, it has shown little concrete evidence of a plan to tackle widening income disparity.

There have been plenty of band-aid remedies, and these look set to continue. For example, the central government acted quickly to support rural consumption by including rural-area subsidies on durable goods in its 2008 stimulus plan. Beijing has indicated that preferential policies, including subsidized trade-in schemes for white goods and some consumer electronics will remain in place this year, as will subsidies and tax cuts on vehicles with small engines.

But these policies cannot remain forever. When the government finally starts to roll back these stimulus policies, it must do something to encourage rural dwellers to feel more comfortable in spending cash on discretionary items.

There is no quick-fix solution – and changes are unlikely to be made overnight – but discussion at the NPC of reforming the hukou and social welfare systems, including healthcare and housing, is an important step toward supporting long-term, nationwide economic growth.