UN Warns Of Economic Cost Of Growing Urban-Rural Divide

Support, not unsurprising, though, for the Hu-Wen policy of harmonious development from the U.N.’s newly published China Development Report, compiled by researchers from the China Institute for Reform and Development and other think-tanks. China needs to provide rural areas with better education, health, social security and employment services to sustain the country’s economic growth, the report says. The increasing increasing rural-urban divide is restricting consumption and reducing productivity.

The U.N. report did acknowledge significant progress made in dealing with rural poverty since the reforms initiated by Deng Xiaoping three decades ago. Rural poverty rates had fallen from 30.7 per cent in 1978 to just 1.6 per cent in 2007. But rural areas were falling behind the cities’ gains in social security, healthcare and particularly education. One reason identified by the report was the hukou registration system that cuts off migrant workers from healthcare and other social services.

The U.N. report argues that investment in public services may produce more economic boost than infrastructure spending, which is the focus of the 4 trillion yuan stimulus package announced a week ago. Every 1 yuan rise in spending on rural education, for example, yields 8.43 yuan in added farm and livestock production, compared with a 6.75 yuan boost from infrastructure, the U.N. says. The trouble is that while that may be true in the medium- to long-term, it doesn’t give the immediate boost to GDP growth that Beijing now needs.

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