An eye to rural China

One saw this for the first time, for example, in the Chinese Academy of Sciences discussion of environmental problems for the Johannesburg summit, which differed from the official views and now this is happening in economic and social policies as well.

It is known that in the second half of the ’90s the agricultural growth rate fell in China, but over the last 25 years the fast growth of the non-agricultural economy led to a rapid expansion of demand for agricultural products. In the backward areas also the spin off was there. Rural economies, subsisting on a low yielding cereal economy, were now growing many crops, visible to the naked eye, more so in the so called backward west as compared to the eastern seaboard which, given its resource endowments, is still the rice bowl even if there is some scepticism on the official statistics. The demand for these rapidly diversifying areas is sustained by the high growth of purchasing power and the improvements in transport infrastructure, bringing larger markets into the purview of the rural economy.

Jianjin Liu of the Institute of Rural Development Research of the Chinese Academy of Social Sciences is an acknowledged expert on China’s non-farm economy and like his Indian counterparts a sceptic of the statistics of achievements given by ministries. But he has worked on an agricultural census. It brings out China’s non-farm employment. It was much lower than 20 per cent two decades ago, but stood at 25.5 per cent in ’01 and 27.5 per cent in ’02. Two and a half decades ago, China stood behind India in non-farm employment in rural areas as the demographer Pravin Visara had shown. In the decade of the ’90s, India stood still in structural transformation and China went ahead. It is only if our manufacturing growth picks up from the last decades 5 per cent to the earlier 8 per cent or higher that we can keep pace with the kind of transformation rural China is seeing.

There are many myths on the ‘Chinese’ rural transformation path. For example, as in India, there is intense debate on subsidised credit to the ‘Town and Village Enterprises’, the famous TVEs. The Chinese economist, Tan Quicheng, has argued that high risk lending causes ‘adverse selection and moral hazards of banks and credit cooperatives lead to soft budget constraints in the township and village enterprises’ and — in a very familiar manner to us — brings out its consequences. The debate is on and the reformers are in the driver’s seat.

The other big change seems to be the switch in the balance of farm investments to private capital. Even in a service like water, the earlier practice of labour-led maintenance of public irrigation by keeping field channels in shape, and so on, is now giving way to larger on-farm private investments. The credit sources for this are not quite clear in a brief trip but the change is unmistakable.

The big debate in China is on the systems to control migration. Many Chinese economists feel that relaxation of rural-urban migration controls will trigger the next round of more widespread and efficient growth. This is a much vexed question and the Chinese ‘solutions’ to it will be of great interest to us. Sonia Gandhi as chairperson of the Rajiv Gandhi Foundation had, in a message for our visit, said that we have so much to learn from China and also that there is great scope for cooperation. She is a respected figure there and is remembered with great fondness. We need to follow through. Improved understanding with China is a plus plus game.