How far do you agree that urban rural division poses the greatest threat to Chinas economic development?

Rural-urban division is a serious but not the greatest problem to Chinas economic development. Although regional disparity could potentially destabilize and limit the growth of Chinas economy, the problem itself is however ameliorated by governmental policies and the shift of industrial focus to the inland region. Besides, more serious and difficult challenges like rising inflation and structural deficiencies have overshadowed regional division as a threat to Chinas growth.

Urban-rural division can lead to social dissatisfaction and unrests unsettling the stability that has afforded China its economic growth. Due to Chinas unequal development policies that had let some get rich first, between developed coastal cities and underdeveloped inland provinces, there is a huge income gap. Rapid urbanization accentuates that difference in material living standards such as education opportunities and medical benefit between rural residents and urbanites. Coastal Chinas GDP is 8.5trillion yuan in 2004, compared to 6.8trillion yuan, the combined GDP of the rest of China. Gini coefficient for income distribution rose from 0.46 in 2005 to 0.477 in 2011 to 0.474 by 2012; and analysts still argue that the actual disparity is much worst. Even with the economy achieving double-digit growth in the aftermath of the 2008-2009 global financial crises, 200million Chinese still lived in poverty at about US$1.25 per day. Given its severity, urban-rural division may be a challenge to Chinas economic development.

Rural poverty, as a result of developmental disparity, is responsible for the influx of migrants to the cities, resulting in the demise of Chinas agricultural sector that has helped to sustain its economic growth. Dengs reforms subordinated agrarian growth to Chinas industrialisation and urbanization programs where countryside was primarily to support the cities with affordable and ample food. Low income and inferior living quality in the countryside have resulted in many peasants abandoning their rural livelihood. Millions migrated to the cities while lands are untilled. This, coupled with rapid urbanization in the inland provinces, has caused much arable land to be wasted. Even for those that stayed back, as there are few resources available for investment, agricultural productivity remains grossly inefficient. Moreover, with many farmers preferring to grow cash crops over food crops, the prices of food are pressured to increase as food supply becomes scarcer, undercutting the low cost of food the Chinese economy had leveraged on to grow.

Division in regional wealth has led to mass migration that strained the capacity of cities, causing socio-economic problems that can impede Chinas development. Slogans promoted by Deng such as Getting Rich is Glorious and Poverty Does not Belong to Socialism have given rise to an eagerness to migrate to cities to enjoy urban life. Since most human resources and capital move from the poor regions to prosperous regions under the market economy system, poverty in western China and ethnic minority regions is increasing. As large numbers of migrant workers become second class urban citizens, they are discriminated against and segregated from the rest of the urban population, excluded from social insurance such as pension insurance, unemployment insurance and health insurance leading to social inequality. Obstacles placed by employers and urban authorities to exclude poorer and less educated migrants from entering the primary labor market also reduce their chances of upward mobility.

Regional disparity, hence uneven distribution of wealth, has impeded sustainability of Chinas growth as it could not progress from a manufacturing to a consumption-based economy. The implementation of preferential policies in coastal provinces as early as the beginning of the 1980s has led to a rapid integration into the world markets, huge inflows of FDI and the development of modern industrial sectors in these provinces. Coastal cities provinces benefit from a higher percentage of arable land, better conditions for developing infrastructure and easy access to sea. As such, economic progress in China, substantial as it has been, is uneven and concentrated in urban and coastal regions. In terms of GDP per capita, the gap between the western and eastern regions increased from 378yuan in 1978 to 4895yuan in 1998. In 2001, of the 30provinces in China, the 3metropolitan cities of Shanghai, Beijing and Tianjin, had to highest per capita GDP in current prices. The concentration of tremendous wealth in the hands of the few, in the coastal cities, is an obstruction governments promotion of a more consumption-based economy.

However, measures undertaken by the CCP government to ameliorate regional disparity are beginning to show results, thereby possibly limiting its impact on Chinas economic development. For example, government has instituted preferential policies for the development of the western regions included more investment, preferential tax rates and greater flexibility in development policies. In 2003, China invested about US$24.3billion in infrastructure projects in the western regions, amounting to 55.2% of the countrys total annual investment in the region. Instead of promoting the Western Region as a labor intensive manufacturing region, the government placed the focus on creating new industries and environmentally friendly technology to exploit natural resources in the western region. Large scale infrastructure projects such as Qinghai-Tibet railway project and natural gas pipeline project aim to help in reducing geography-related constraints such as roads and railways might help in reducing transportation costs.

Preferential policies implemented to help the declining agrarian sector have also helped to contain some negative repercussions of urban-rural divide on Chinas economic development. the government has vowed to keep at least 120million hectares of arable lands for agriculture. From 2008, China is also purchasing farmlands on parts of Africa to grow its food. Foreign food purchases are made from countries like Australia and Brazil. Number One document, a direct subsidy and elimination of taxes for the peasants, has increased the amount of subsidies given to peasants sharply. Government also encourages township enterprises to increase revenue for the farming families. This is generally beneficial for participating localities. Subsidies for rural residents have been given out to spur their consumption ability and for the purchase of household appliances especially during the 2009 global financial crisis.

Stress on Chinas development by the problem urban-rural divide, is also lessened by the shift in manufacturing gravity from the prosperous coastal cities to the inland provinces. The Chinese government has allocated more infrastructure investments and international development agencies loans to the central and western regions. Developmental efforts in Shaanxi, Sichuan, Chongqing, Yunan and Xinjiang have also been accelerated. For example, in 2003, China investment US$24.3billion in infrastural projects in the western regions, amounting to 55.2% of the countrys total annual investment in the region. Eight key projects were completed by 2003, including three road construction projects, an airport extension in Shaanxi Province and four west-east electricity transmission projects.

Urban-rural divide could not be the greatest obstacle to Chinas development as it is overshadowed by other challenges such as inflation and structural deficiencies of the Chinese economy. Inflation has cropped up as a serious problem in recent years, partly due to the excessive liquidity within the economy and partly caused by some structural factors. Chinese inflation is made up of elements comprising both a demand-pull and a cost-push type, further complicated by seasonal price fluctuations and imported inflation. The economy has also become so open and globalised that it becomes susceptible to imported inflation, especially when the government has been reluctant to speed up yuan appreciation. SOEs remained inefficient and unprofitable. They are responsible for a large part of Chinas bad debts and industrial overcapacity. The privileged entrenchment of SOEs has resulted in their monopolization of resources and capital at the expense of stifling growing private enterprises. Corruption and wastage of resources are rift.

In conclusion, regional disparity could potentially destabilize and limit the growth of Chinas economy. However, the problem itself is however ameliorated by governmental policies and the shift of industrial focus to the inland region. Hence, urban rural division does not pose the greatest threat to China in terms of severity as it is not irreparable unlike other more deep-seated problems.