Everyone is familiar with the China growth story. In fact, this story is so familiar that it is very easy to miss this subtlety- the ‘China’ in the China growth story has two faces to it. It is easy to see one face of ‘China’ and treat that face as the monolithic whole for the entire nation. This assumption misses the complexity of China.
To understand China’s complexity, consider its economic growth over the past couple of decades. No doubt, China’s economy grew very rapidly over that period of time. But this growth is very unevenly distributed as most of the growth are concentrated on the cities and major population centres. This is the face of ‘China’ that everyone sees in the China growth story. As of right now, this face of ‘China’ is facing a major economic correction (see Does the major Chinese economic slowdown signify the end of the commodities boom?). This in turn has major implications on commodity prices.
Then there’s the other face of ‘China’- the backwater rural regions. They have yet to experience much of the benefits of the prior economic growth. These rural regions still form the majority of China’s population. In other words, the majority of Chinese has yet to fully benefit from the two decades of economic boom. As we wrote in Why are the poor suffering from food shortages?,
At the end of 2006, China’s rural population stood at around 737 million. From 1990 till today, we estimated around 230 million rural peasant Chinese migrated from the countryside to the cities. Our guess is that the majority of the rural migrants are males. Over the past couple of decades, it is this mass migration that provided the vast quantity of labour to propel China’s rise as a major economic power.
The uneven distribution of economic growth over the past couple of decades is socially unfair and thus, hardly surprising that the rich-poor gap had widened since then. In short, the economic boom bypassed rural China. But on the positive side, this means that rural China is also much less affected by the currently unfolding economic bust in the cities. However, this bust still has an impact on rural China to the extent that these 230 million peasant migrants to the cities have to return to their homes in the countryside due to the collapse of the Chinese export industry.
Therefore, in the face of a looming mass reverse-migration back to the rural regions, the utmost priority of the Chinese government is to lavish development on the inner rural regions of China that have missed out on the economic boom. At the same time, the impact of the economic bust on the urban dwellers has to be cushioned through spending on social welfare. To achieve that, the Chinese central government have to embark on legal reforms to give peasants more rights.
The implication of this is that in the years to come, China will be too busy looking after itself to continue lending to the US.
Tags: China, migration, rural region
