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Improved Rural Economy Vital

The co-ordinated and balanced development of urban and rural areas is of vital importance to achieving the country's goal of building an all-round prosperous society.

That was the key message at the Sixth Guanghua New Year's Forum in Beijing on Saturday.

At a time when the country is facing the snag of an inactive rural economy, the call for co-ordination and balance between urban and rural development is a timely reminder of the daunting task we face in our efforts to boost the national economy.

The rural population accounts for more than 60 per cent of the national total. But they enjoy only 30 per cent of the country's financial assets -- an imbalance that throttles normal development of the rural economy.

And the average annual disposable income of urban residents was 3.11 times the average annual income of farmers last year. Farmers' weak purchasing power has become a drag on China's economy, which is yet to fully recover from lingering deflation.

"It has upset our efforts to boost domestic demand and held back the fast and co-ordinated development of our national economy," Uyunqimg, vice-chairperson of the Standing Committee of the National People's Congress, said at the high-profile forum sponsored by Guanghua School of Management under the Peking University.

Agricultural reform heralded China's economic reform starting in late 1970s. The innovation of a contracted responsibility system, which linked income to household output, greatly boosted farmers' enthusiasm and galvanized the rural economy.

In 1978, the average annual income of farmers was about 200 yuan (US$24). Last year, it was more than 2,400 yuan (US$290), according to Uyunqimg. The Engel Coefficient, which indicates the consumption level, declined from 68 in 1978 to 46 last year, a sign of farmers' higher living standards.

During the process, however, the problem of low farming efficiency has gradually surfaced. China has more than 800 million rural residents, but its per capita cultivated land is less than half of the world average.

Inadequate fiscal input in rural areas has also contributed to the difficulties plaguing those areas. As a result, the tempo of rural development has lagged behind that of the overall economy.

The central government has responded to this. Early this year a special central conference on rural work was held to find solutions, and the topic was high on the agenda at the 16th National Congress of the Communist Party of China (CPC) last November and the Third Plenum of the 16th CPC Central Committee in early October.

To boost the rural economy, the first step should be to encourage farmers to work outside to reduce the number of redundant rural labourers.

Agriculture now accounts for less than 15 per cent of China's gross domestic product (GDP) while rural labourers account for 43 per cent of the national total. Experts say there are 150 million redundant rural labourers.

"It is an urgent task to push the urbanization drive to facilitate the transfer of rural labourers to cities and towns," said Zhang Xiaoqiang, vice-director of the State Reform and Development Commission.

Farmers were formerly discouraged from relocating to cities to work. Nowadays restrictions have been loosened, but migrant workers often suffer from discrimination in urban areas.

"Our residence registration system should be reformed promptly to grant equal treatment to farmers," Zhang added.

The migration of farmers to cities and towns will not only increase farmers' income, but implant some ideas in their mind that are conducive to local economic development.

"For example, they may become more conscious of the importance of their child's education," said Li Yining, a renowned economist from the Guanghua School of Management.

Financial support is another must for boosting rural economy.

"Now finance has become one of the scarce (production) factors in the rural areas," warned Wen Tiejun, president of China Reform magazine, at the forum.

The 1990s saw the State banking force gradually retreat from the rural areas after its failure to profit due to the decentralized farming mode and lack of credit records of rural residents. And in late 1990s, the State shut down many rural co-operative financial institutions to "maintain financial order."

Finance is the lifeline of the rural economy. Without repletion of capital into the area, many farmers began to borrow from usurers.

"Usury is common in some places. But what can farmers do if they do not borrow from them (usurers)?" said Wen.

Wen calls for a rural co-operative financial structure that fits the needs of farmers to develop the rural economy.

What is indispensable also includes other supports, such as medical care, direct subsidies for farmers who abide by the World Trade Organization "green box" policy, the social security network, and more fiscal input in rural education.

This is a comprehensive package of tasks, which is obvious extremely challenging and will take time to implement.

But we cannot afford to wait.

Our economy has just begun to step out of deflation. This year's GDP is forecast to grow by 8.5 per cent. Without solving the problems that fetter the growth of the rural economy, however, it will be difficult to sustain the national economy's impressive growth momentum.

(China Daily December 29, 2003)

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