Chinese Academy of Social Sciences (CASS) estimates shows that the earning in urban area is 5.2 times more than the take home in a rural area, and it is the widest ever income gap in the country’s history as several commentators have pointed out. The urban-rural income gap peaked to 68 percent by end 2011.
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A message from CASS study is that Beijing must pay attention to social security if the country wants to avoid flare ups. Already an estimated 200 million migrant workers are outside the social security net. People moving from villages to towns are denied social security benefits. All this makes China a volcano that is ready to erupt.
While the world over the trend is to check urbanisation, and make the urban facilities available at the rural doorstep, China is allowing at a rapid rate. Last year, studies show, urbanisation increased by about 51 percent. It shows that more villagers are in search of an El’Dorado. It also means continued neglect of the villages and their mainstay – agriculture. Unless there is a scene reversal, sooner than later China will be heading for dependence on heavy food imports.
The system of “neglecting rural growth and supporting thriving urban areas has unhindered the country’s urbanisation”, Global Times quotes social scientist Sheng Guangyao, as saying. He worked on the CASS study on urban-rural divide.
As of now 691 million Chinese are living in towns and cities. Another 500 villagers are on their way to swell the ranks of urbanites. Since all of them are not profitably employed nor have they secured jobs, social security concerns should dominate the discourse. CASS study puts the cost of social safety net at $ 794 billion over the next two decades.
Chinese miracle may not have become a yesterday story. It may not indeed. But there are no near term solutions to its economic ills, more so because the firewalls between Chinese and global economies have more or less crumbled in the recent times.
Consider the trade data released by the General Administration of Customs on August 10.
Exports year-on-year basis were $176 .9 percent in July, an increase of one percent
The data clearly points out that domestic demand is slowing when the country is hit by the absence of big orders from overseas. A turn around in European economy will bring relief to the Chinese managers but it looks like a mirage. Exports to Europe fell 3.6 per cent to $192.4 billion in the first seven months of the year from the same period in 2011.
Market analysts expect a stimulus booster to breath life into the economy. The prospects don’t look bright since the apex bank has cut the interest rate twice this year in June and July
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The real estate market, which has been like a big bubble the past couple of years, has begun to cool. This followed curbs on buying second hand homes and hike in minimum down payments for housing loans. This move in turn hit the flow of fresh investments into housing and has had a negative impact on manufacturing sector
Some government economists believe higher public spending could boost the investment appetite in China, according to a Wall Street Journal (August 10) report. But it doesn’t appear to be coming in a big way since the political and bureaucratic machinery is pre-occupied as of now with the impending ‘transition for the top leadership’.
