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Liu Shijin

The 16th National Congress of the CPC put forward the goal of building a well-off society in an all-round way. The "all-round" here means not only a quadruple increase in economic aggregate, but also an all-round social progress. After a development goal is set, the next question is what development road or development model should be chosen. International experience indicates that not all countries that have taken the road of industrialization can succeed in realizing industrialization and modernization. For example, the former Soviet Union and the East European countries all had a very high proportion of industries, especially heavy industries, in their economies. They were even world leaders in some technologies. But their industrialization failed in the end. The fundamental reason is that under the system of planned economy, their economic structures were grossly distorted and were unable to develop in a sustainable way. There are more than 100 countries and regions in the world that have adopted the system of market economy. But not all of them have realized industrialization and modernization. We say marketization is a major condition for industrialization and urbanization, but the former does not necessarily guarantee a realization of the latter. In some countries and regions, the process of industrialization and modernization either tumbled or suffered major setbacks. There were many complex reasons, but the most important ones were the gross economic and social imbalance within these countries or the strong attacks from the outside world. These lessons are still meaningful to us. The development concept emphasizing comprehensiveness, coordination and sustainability is aimed at selecting the right development road or development model in the course of realizing the goal of building a well-off society in an all-round way and in the course of building a moderately developed country. In this way, we can organically integrate the strategic goal of achieving modernization in "two steps" with the new development concept. Below I attempt to make a further analysis of the issue.

I. Solving the Urban-Rural Dual Structural Contradiction Should Be the Main Task for the Process of China’s Industrialization and Modernization

The level of industrialization should be determined by the changes in the structure of output value and the increase of the proportion of industries and services in the national economy. But more importantly, it should be determined by the changes in the structure of employment. This means that most of the rural population has entered the non-agricultural sectors, and those continuing to work in agriculture have seen fundamental changes in the styles of their work and life. The basic standard for the realization of industrialization should be that all members of society can share the fruit of industrialization. In another sense, industrialization should put people first. If there are a considerable proportion of farmers in the traditional sense, industrialization cannot claim to be successful no matter how high the levels of industrial and service development are. The urban-rural dual structure is inherent with developing countries. But the urban-rural separation policy and the development strategy which used agricultural accumulation to support industries and especially heavy industries practiced in China before the initiation of reform and opening up had made the urban-rural dual structural contradiction all the more acute. During the 1952-1978 period, agriculture’s share of China’s gross social product dipped from 45.4 percent to 20.4 percent, while the sector’s share of the country’s total social labor declined only from 83.5 percent to 73.8 percent. As a result, more and more labor continued to stay in the agricultural sector and the countryside was in fact excluded from the country’s process of industrialization. For nearly 30 years, personal consumption in China’s rural areas rose only by 57.5 percent, which was equivalent to half of the growth rate of personal consumption of those outside the agricultural sector. After the initiation of reform and opening up, however, the urban-rural separation system has encountered major attacks due to the development of the market economy. As a result, the scope and scale of the exchange of factors between the urban and rural areas have also become increasing larger. Over the past 20 years or so, nearly 200 million rural people have sought employment in non-agricultural sectors and in the urban areas through diverse methods. The development of agriculture and the migration of rural people to the non-agricultural sectors have greatly improved the farmers’ income and their living conditions. From 1978 to 2002, the per capita net income of the farmers rose by four folds, or at an annual rate of 7.2 percent.

But the personal income disparity between the urban and rural areas widened again after being narrowed for some time. From 1978 to 1984, the personal income disparity between the urban and rural areas declined from 2.37:1 to 1.71:1 (the farmers’ income is 1; the same below). The disparity became gradually wider afterwards. In 1993, the disparity was as wide as 2.54:1, larger than that in the early years of reform. Rough estimates put the disparity in 2002 at 4:1 if only monetary income is taken into consideration. If various kinds of welfare subsidies are included, the disparity could be as wide as 5~6:1. The widening income disparity between the urban and rural areas can be attributable to the factor that productivity in agriculture is different from that in non-agricultural sectors. But in a situation where urban-rural migration became possible, a widening disparity indicates that the migration of rural population to the non-agricultural sectors and urban areas still faces serious system barriers.

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