China's GDP growth rate reached 8.7 percent in 2009 as announced recently by the National Bureau of Statistics (NBS). The data indicates not only the achievements of China's stimulus plan in the face of the worldwide economic recession, but also shows the persistence of China's leading role in the global economic recovery.

As we witness China's fast economic growth, we have also seen that the Chinese people are better off than at any time in history. Personal income, including both farm and non-farm income, has increased rapidly. The Chinese people are now enjoying higher income levels with low inflation, better health and more goods and services than ever before. The real non-farm, per capita, disposal income almost doubled within the six years from 2003 to 2009.

However, it is also a fact that the gap between farm and non-farm income has widened (see the following graph).

In 2009, farm per capita net income was RMB5153 (US$755), while non-farm per capita disposal income reached RMB17175 (US$2515), which is about 3.3 times of farm net income. From 2000 to 2009, farm per capita income increased 128.7 percent, while non-farm per capita disposable income increased 173.5 percent. The so-called rural-urban inequality, measured as urban-rural income ratio, increased from the 2.787 in 2000 to 3.33 in 2009.

As stated by Premier Wen Jiabao during the World Economic Forum hosted in Dalian on September 10, 2009, China must "narrow the gap in income distribution" and dramatically decrease inequality. Last month's Central Conference on Rural Work also focused on how to stimulate rural consumption and raise rural living standards to promote economic growth and ensure social stability.

As reviewed by the Organization for Economic Co-operation and Development (OECD) on China's agriculture policies, one of the most striking features of China's development in the reform period since 1978 was a large and growing income disparity between the rural and urban populations. Compared with OECD nations, the level of government support to Chinese agriculture fluctuated at low levels through the 1990s, rising to 8 percent in 2003, well below the OECD average of 30 percent. In considering the agricultural free trade movement and China's WTO membership since 2001, there has been a much lower impact on promoting agriculture trade than on other Sino-economic sectors. Meanwhile, Chinese farmers have benefited much less than their counterparts in developed nations even though China is considered a developing country by many standards. For instance, most developed members of the WTO, such as the United States and the EU, have provided huge subsidies to their agricultural sectors for decades. In contrast, China's agricultural sector has been subsidizing the domestic industrial sectors for decades.

The fact is that surplus farm labor and low educational levels with low technological support have contributed significantly to the under development in rural areas. To accelerate rural development, China will have to enhance its agriculture related institutions and increase policy transparency, including improvement to education, health care, agricultural technology support. As learned from leading WTO members, farm subsidies may also have a key role to play in promoting China's agriculture and in narrowing the rural-urban income gap.

China is still a large agricultural nation. With 1.3 billion people relying on domestic farm products, to what extent China can develop its agriculture, will be decisive for China's sustainable development in the coming years. There is no doubt that rural-urban inequality has increased significantly, and there is also a common understanding that more needs to be done to solve this inequality. Although such inequality in China will most likely worsen, at least in the short run, government actions – e.g. in education, in farm support, and in agriculture stimulating initiatives – all deserve immediate attention.

The author is a columnist with China.org.cn.