How China can help its rural poor

Since launching reforms in 1978, China has grown faster - and over a longer period - than any other country, ever. This achievement means that China is now the world's biggest market for industries ranging from telecom to automobiles to energy.

But how much has this development filtered down to ordinary people, especially those living in rural areas?

If China wants to further cement economic and social benefits in every part of the country, then it has to take some tough measures, said Zhang Xiaobo, distinguished professor of economics and associate dean, National School of Development, Peking University, in an interview with China Daily.

Zhang said that China should invest more in rural education, particularly in interior regions, by extending the nine-year compulsory education to 12 years.

The country should also recognize farmers' ownership of their residential land – as farmers cannot use their houses for mortgage, and it is extremely difficult to transact their residential houses because of ambiguous property rights.

Finally, the authorities should abolish the hukou (residence permit) system, giving rural residents the same opportunities as urbanites. Under the current system, rural migrants cannot access welfare benefits or subsidized housing in the cities in which they work.

Zhang urged the government to implement these steps and also stressed that China has achieved much more compared to other developing countries.

"Although the Indian economy has also grown very fast in the past two decades, its trickle-down effect has not been as strong as China's. Indonesia has fallen into a middle income trap and failed to achieve much in poverty reduction in the past decade. Brazil, on the other hand, has made much progress in reducing urban poverty through social safety programs," he said.

Additionally, the illiteracy rate in China was 31.9 percent in 1981, based on the 1982 Population Census. It dropped to 4.08 percent by 2010 (according to the 2010 Population Census). Over the same period, the infant mortality rate - defined as the number of infant deaths per thousand births - declined from 36.6 to 13.1.

Zhang added that another area where China has made impressive progress concerns the increase in its per capita income.

Per capita income in China in 1980 reached $190, about 1/54 of the per capita income in the US ($10,300). In 2013, per capita GDP in China and the US were $6,629 and $51,248, respectively, and the gap has shrunk to 7.7:1.

In India, on the other hand, 35 percent of adults do not have basic reading and writing skills, its infant mortality rate is 44.6 per thousand births and per capita income stands at $1,504.

Though there are many reasons why China has been able to improve the lives of so many people so fast, Zhang credits the rural reform (the so-called 'household responsibility system') for triggering rapid economic growth. And he also said that the rural household responsibility system adopted in the early 1980s granted farmers land cultivation rights and empowered them to make their own production decisions.

"Due to better-aligned incentives, agricultural production and rural incomes witnessed a dramatic increase in the ensuing years. Consequently, the rural poverty rate dropped sharply from 76 percent in 1980 to 24 percent in 1986. In other words, more than 400 million people moved out of poverty in a short, six-year spell," Zhang said.

He also said that the opening up and reform of the economy ensured a three-decade long continuous growth, which allowed hundreds of millions of people from the rural areas to seek job opportunities in the big cities.

And, since 2004, China has passed the so-called "Lewis turning point" (real wages start to increase more rapidly) thanks to the increasing opportunities in the non-farm sector, which benefit the poor who mainly rely on labor income.

Lastly, Zhang said the abolishment of agricultural taxation was another favorable policy for rural residents.