Prospects of China’s rural household income growth in 2009

Citation

Xin, X. (2009), "Prospects of China’s rural household income growth in 2009", China Agricultural Economic Review, Vol. 1 No. 4. https://doi.org/10.1108/caer.2009.40601daa.001

Prospects of China’s rural household income growth in 2009

Article Type: Editorial From: China Agricultural Economic Review, Volume 1, Issue 4

Sustaining China’s rural household income growth has been a growing concern since September 2008 when the global financial crisis hit Chinese real economy, and the adverse impact of this crisis on rural household income growth is becoming increasingly severe. The growth rate of rural household income per capita still fell behind that of urban household income per capita in 2008, and may continue into 2009. The continuously deteriorating urban-rural income gap raises growing concerns about social stability (Chen, 2009). The ratio of urban-rural income per capita already reached 3.31:1 in 2007 National Bureau of Statistics of China (NBSC) (2008).

The Chinese Government, cognizant of the importance of raising rural household income in sustaining its overall economic development and social stability, began implementing a favorable basket of agricultural policies to boost rural household income. The No. 1 Policy Document of 2009 centered on sustaining rural household income growth. The positive effect is that agricultural income may increase as a result of the favorable agricultural policies. Various agricultural subsides including grain, seeds, agricultural machinery and agricultural inputs subsides will be increased to 120 billion Yuan in 2009 from 103 billion Yuan in 2008. The minimum grain procurement price will increase by 13-16 per cent, or 0.22 Yuan/kg, which may increase farmers’ gross income by 110 billion Yuan. These two policies may lead to a 3-4 per cent increase in rural household per capita income. The World Bank (2009) expresses its concern over this and argues that the minimum grain procurement price is often not binding. Public agricultural investments will also increase to improve infrastructural facilities. The falling agricultural prices since mid-2008, however, are very likely to reduce rural household agricultural income. The Deputy Director of Rural Department at the NBSC said, at a workshop held on 27 February 2009 by the Rural Economy Research Center of the Ministry of Agriculture, that rural household agricultural income growth in 2009 would be unprecedented.

It should be noted however that around 40 per cent of rural household income comes from wage income. An increasing number of rural migrant laborers returning home after the outbreak of the financial crisis will certainly adversely affect rural household income growth. The latest official estimate (by Ministry of Human Resources and Social Security) puts the number of unemployed rural migrant laborers in 2009 at over 20 million which accounts for 15.3 per cent of the total number of rural migrant laborers (Zhang, 2009). This in turn suggests that, on average, about 6 per cent of rural household income will be lost. The World Bank (2009) has just downgraded China’s economic growth rate to 6.5 per cent in 2009 which is about 3 percentage points lower than the potential growth in 2009; and estimates about 16-17 million less non-agricultural employment in 2009. Using the World Bank estimate, we can deduce that rural household income in 2009 will decrease by about 4.5 per cent because of the job loses encountered by rural migrant laborers. On the other hand, rural migrant labor wage also faces lower growth rate and may even take a downward trend. The Deputy Director of Rural Department of NBSC also expresses concern that it will be tough in 2009 to even maintain rural migrant labor wage at the 2008 level (Zhang, 2009).

The large number of returning rural migrant workers has become an increasing source of concern in China, and the government encourages employers to avoid laying off more workers. A positive side however is that the returning migrants may find alternative ways to compensate their lost income. The Chinese Government at all levels has also taken measures to support these returning migrants find alternative ways to earn income. China’s Vice Premier Liangyu Hui urged that local governments should seek every means to help migrant workers find jobs, calling it “a prominent and important task” in the current rural work agenda. He also urged local enterprises to guarantee job opportunities for migrant workers, and asked infrastructural project contractors to hire as many migrant workers as possible (Xinhua, 2009). However, the stagnation of China’s general economy growth casts doubts on the possibility of these returning migrants finding new jobs.

China’s rural household income growth also depends on whether the global financial crisis will be intensified. At a press conference held by the State Council Information office on 2 February 2009, Xiwen Chen, Director of the Office of Central Rural Work Leading Group said, “to sustain China’s agricultural and rural household income growth is overwhelmingly important for the Chinese government”. He further added that 2009 may be “possibly the toughest year” since 2000 (The People’s Daily, 2009).

Xian Xin

About the Editor

Xian Xin is the Deputy Dean and a Professor of the College of Economics and Management of China Agricultural University in Beijing. He is also the Deputy Secretary-General of the Center for Rural Development Policy of China. He visited the University of Sydney as Senior Visiting Professor and worked as post-doctoral fellow in the Department of Economics of the University of Western Ontario. His current research interests include international trade, agricultural economics, and rural development. He is the author of over 30 articles in the journals like The World Economy, Canadian Journal of Agricultural Economics, Journal of World Trade, Economic Modelling, NBER working paper series, and China’s leading journals in agricultural economics. Xian Xin can be contacted at: xinxian@cau.edu.cn