Since the beginning of rural economic reforms in the late
1970s, rural incomes and living standards in China have
improved dramatically, most notably during the early
1980s when productivity increased rapidly following the
return to family farming. Real rural per capita incomes
were nearly six times higher in 2000 than in 1978 (fig.
N-1). However, income growth began from a very low
base, and was uneven over time. Urban incomes grew
even faster over the reform period, and China now has
one of the largest urban-rural income disparities on
record anywhere. According to China’s official statistics,
rural incomes in 2000 were only 36 percent of urban
incomes on average, compared with 77 percent in the
United States. The growing urban-rural gap is partly
attributable to policies historically biased in favor of
urban areas, such as extractive rural procurement and
taxation policies, biased investments, and a strict resident
permit system that clearly divided urban and rural populations.
The gap also is the result of rapid industrial
growth in urban areas and restrictions on labor mobility
that have prevented rural workers from benefiting fully
from that growth.
As China enters the new century, there is growing
concern about whether the country can maintain
momentum in increasing rural productivity and incomes.
These concerns are punctuated by slow rural income
growth in the late 1990s, the recent decline in employment
in rural industry, and concerns that China’s entry
into the World Trade Organization (WTO) will weaken
the country’s agriculture. The recent relative stagnation
of rural incomes in comparison with urban incomes
highlights the importance of taking active steps to stimulate
rural income growth. If effective, such steps will
affect not only the welfare of millions of Chinese citizens
but also the structure and competitiveness of the
country’s agriculture and trade.