“Regional disparity poses a greater problem to stability than rural-urban migration” Discuss.

“Regional disparity poses a greater problem to stability than rural-urban migration” Discuss.

Regional disparities refer to the divide in economic growth and social well-being between the prosperous coastal regions and the land locked inland provinces. Because of these disparities, it inevitably led to the phenomenon of rural migration whereby rural residents migrate to urban centers to look for work. In a way, both can pose problems to stability. On one hand, regional disparity can pose as a threat to economic and social stability inside China whereas the estimated 25 million migrants pose distinct social integration and stability problems within China’s modern cities. Therefore, I disagree with the view that regional disparity poses a greater problem to stability as compared to rural-urban migration as both are equally as crucial.

 

  • Economic instability

Regional disparities can be a threat to economic stability as inland provinces are saddled by under development, corruption, pollution and bad debts. With a general lack of education, healthcare, infrastructure and technology, inland provinces could not develop as quickly as coastal ones. Furthermore, coupled with the fact that economic reforms such as the formation of Special Economic Zones (SEZs) by Deng in the coastal regions in order to attract Foreign Direct Investments (FDI) and encourage economic growth, it has only resulted in these coastal regions and urban cities to benefit more from investment and development opportunities which land locked inland provinces lack. Furthermore, regional disparities are also accentuated by China’s geography, whereby mountainous Guizhou’s GDP per capita is 10% of Shanghai’s GDP. In addition, inland provinces face the most severe pollution problems that slow economic growth. Although the government has rolled out massive national level policies like Western Development Programme (2000) and Revitalize Central China (2004) and the North East China Programme (2004) to push development inland, these massive projects are often prone to corruption and had led to excessive capacity with underutilized ports, factory towns and empty housing towns. This in turn resulted in less well-off provinces taking on debts in order to stimulate economic growth. As such, China’s government’s debt has been increasing over the years and as of 2015, China’s debts is 250% times its GDP. Therefore, it is crucial that China’s issue of regional disparities is handled well as it can lead to economic instability if not carefully dealt with.

 

  • Social unrest in rural areas

Furthermore, a growing regional divide has fueled countless riots and social unrest in rural areas, given the fact that the rural regions and the rural population have never truly caught up with the coastal provinces. Whether it is education or job opportunities, social welfare or medical services, all these amenities and services are all in favour of those living in urban cities, whereas those in rural areas struggle, given the lack of development in these areas due to the priority given to coastal regions with the establishment of Special Economic Zones (SEZs). As of 2015, The GINI Coefficient for national income was 0.462, one of the world’s worst. With this drastic income gap whereby the per capita income of urban households was 2.73 times of the rural households in 2016, social instability and unrest has becomes ever more likely whereby rural citizens are no longer able to cope with the rising costs of living, resulting in up to 300-500 protests are occurring in China each day as of 2014.

 

  • Social unrest affecting national unity

The riots and suicide attacks in Xinjiang and Tibet also shows that regional disparities and a mix of religious intolerance has led to rebellion which poses a direct challenge to national unity. In the 1990s, Tibet has enjoyed annual growth rates faster than other parts of China with the Go West policy. However, this prosperity was not shared by most Tibetans and Uyghurs as most of the wealth and jobs went to Han Chinese. With the completion of iconic projects like the Beijing to Tibet railway line, the Han influx worsened inflation and widened the rich-poor gap. Not only do Tibetans and Uyghurs lack job skills to be employed in the new economy, but they do not speak Mandarin as well. This coupled with religious extremism as well as harsh crackdown on religious and cultural practices by the CCP in recent years in the name of “terrorism”, has only led to a series of severe backlash. In 2014, a string of suicide slayings and bombings by Uyghur extremists have resulted in the 2014 Kunming Attack. Thus, this shows that should the government not manage regional disparities, it can lead to instability that affects the economy due to social instability in the country.

 

  • Rural-urban migration

However, rural urban migration presents a unique threat to stability in the cities given that 250 million migrants now reside in these urban areas. The escape the poverty of the inland provinces has resulted in approximately 250 million rural migrants moving into cities to search for a better living. In most cases, these rural migrants end up forming the low wage labour force that keeps the Chinese economy growing. But at the same time, this huge influx of migrants poses as a challenge to the government in managing and policing them in cities as urban cities simply do not have the resources to provide for the huge influx of migrants. In Beijing, rural migrant takes up 1/3 of its population. Furthermore, the restriction of access to urban services imposed on these migrants by the Hukou system makes life extremely difficult for those rural migrant workers living in urban areas. This creates social tension between the migrants, locals as well as with the local authorities. In Beijing, the police has imposed walled-in villages in some places where migrants live. Harsh treatment of rural migrants by the police or urban security guards have often led to bloody riots. In 2014, five urban security guards were beaten to death by mobs for killing a street vendor believed to be a migrant worker. During times of financial crisis such as in 2008 when factories closed, rural migrants have also turned to rioting. Therefore, in such cases, the influx of rural migrants have created a volatile situation in many Chinese cities.

 

  • Lack of Hukou reforms

Similarly, the lack of Hukou reforms worsens the plight of these rural migrants and elevates the social tension. Deprived of urban Hukou rights, they remain a permanent underclass in the cities whereby they are not allowed to enjoy any urban services such as housing and education in the city that local folks have. As of 2015, approximately 40% of the primary school children in Beijing lack city Hukou with the barring of migrant children from local schools in urban cities, the estimated 50 million children living in urban cities today are denied access to education and would have to travel back to their rural province to be able to attend schools. However, even those children that remain in rural provinces do not fare that well either socially or in education. Furthermore, even if the migrant children had a university education, they have a smaller range of jobs to choose from given that some are reserved for locals. As a result, many remain jobless and join the ant tribe – workers who cannot afford housing that is becoming too expensive, but have to stay in a small rental space and travel long distance. The slow pace of Hukou reform and the general sense of injustice and discrimination felt by rural migrants have heighten the insecurity of rural migrants and causes social instability.

 

Both regional disparities and rural migration pose a threat to economic and social stability. Rural migrant problems can be said to be more pertinent as 250 million reside in the many urban cities and they become a force to contend with. If we see regional disparity as the cause for rural migration, then we can say that regional disparity is a longer term threat to disparity. Given the vastness of China, Beijing cannot solve the problems on both fronts simultaneously given that it does not have the resources to pay for urban cities’ Hukou expenses. At the same time, the development of inland provinces will take many generations and in the long run, as inland provinces develop and regional disparity diminishes, rural urban migration might become less necessary. Therefore, rural migration presents a clear and immediate threat to stability more than regional disparities.

“China’s economic development is most threatened by its regional disparities”. How far do you agree?

“China’s economic development is most threatened by its regional disparities”. How far do you agree? (Challenges to China’s economic development)

 

Since the start of reforms in 1978, spectacular economic growth and poverty reduction in China have been accompanied by sharp rises in inequality and increasingly frequent manifestations of social tension through unrest of various types. In response to these rising inequalities, an explicit objective of “harmonious development” was adopted by Chinese governments in 2005, with a key dimension of harmonious development being a balanced development across regions. Hence, it could be seen that regional disparities, if not resolved, could pose a major threat in slowing the country’s economic growth rate is also threatened by other equally important factors such as the sustainability of its cheap labour, ageing population, its property bubble and its bad debts.

 

  • Regional Disparity

Regional disparities pose a major threat to China’s growing economy as protests and unhappiness among the citizens may cripple the economic development. With location advantages, the increased investment and tax breaks made the coastal regions more attractive to both foreign and domestic companies. In less than 2 decades, China has become the largest recipient of FDI among developing countries from a virtually closed economy in the late 1970s. As a result, the coastal regions experienced much more rapid growth, widening the coastal-inland gap in the reform period since the 1970s. Since China’s economic growth success is not equally shared among its huge population, the rise in food and China’s property prices has made life very difficult for China’s poor and in turn, has resulted in increased social tension and protests against the government whereby up to 300-500 protests are occurring in China each day as of 2014. Therefore, the problems stemmed from regional disparities could act as obstacles to continuous economic growth which the Chinese government needs to observe closely.

 

  • Sustainability of Cheap Labour Costs

Nonetheless, other equally important factors such as the sustainability of cheap labour cost, could also pose a great threat to the economic development in China. For decades, China’s economy has prospered tremendously, being termed as the “manufacturing hub” of the world. However, a large part of China’s successful growth is because of a massive supply of cheap labour, with workers from rural parts of the country migrating to the cities to find employment and also attracted many multinational corporations such as Apple and Microsoft to move manufacturing operations to China. However, China’s sustainability of cheap labour costs proved to be short lived whereby many foreign manufacturers are downsizing or leaving the country due to an increase in the supply of low cost/low quality products as well as the increase in labour costs in China in recent years. For instance, Microsoft have been shutting down its factories in China, and with plant closures in Beijing and Dongguan, resulted in 9,000 job losses that made up half of the 18,000 announced in 2014. However, this is not a surprise as in any developing economy where the supply of cheap surplus labour starts to fall and the bargaining power of workers rises.

 

  • Ageing population

Another potential great threat to China’s economic development is that the ageing population may hinder the economic progress significantly. Over the past 30 years, China’s total fertility rate has fallen from 2.6%, well above the rate needed to hold a population steady, to 1.55% as of 2015. On top of fewer children being born, China is ageing rapidly, with 10.5% of its population being over 65. This means that China is likely to grow old before it grows rich, making it the first major economy to encounter such a problem. Furthermore, an ageing population would also mean that the number of people coming towards the end of their working lives would significantly increase, reducing China’s manpower which affects its economy. Hence, with an ageing population, the reduced working population in China could slow down economic development significantly.

 

  • Bad debts by local governments

Bad debts that is held by local government is also a major threat to the country’s economy. Over the years, the debts accumulated by local governments were built up to fund public works, which were supposed to be funded by the central government before the financial crisis struck in 2008. However, after this crisis, the Chinese government went on an unprecedented borrowing binge and has been struggling to clean it up ever since. As of 2015, China’s debt to GDP ratio had reached record high, with it being 250% of its total GDP. This ultimately poses as a huge threat as should its debt not be reduced, it would only result in fatal consequences such as derailing state-owned banks, triggering a systemic crisis as banks are closely linked to the government.  As such, the debt by the local governments poses a major threat to China’s future economy. If it does explode, the central government will have to step in and help.

 

  • Property Bubble

Inflated by high end speculation and the flow of cheap money, China’s property bubble seems to keep on growing and now it’s nearing its popping point which could cause a collapse in its economy. Chinese huge property bubble continues to expand spectacularly and remains central to its economy, accounting for some 10% of its total GDP as of 2013. As such, the government must, once again balance the need to cool the market, clamping down on speculative activities, while not damaging economic growth. Hence, the possible imminent property bubble burst could threaten the country’s economic development.

 

In conclusion, upon analyzing the various possible factors that could affect the economic development of China, it can be observed that although regional disparities poses a major threat to the country’s economy,  the combination of a smaller workforce and a rapidly ageing population further pose a double whammy to China’s economy.