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Industrial development vital to rural revitalization

LIAO YONGSONG | 2018-08-31 | Hits:
(Chinese Social Sciences Today)



Rural tourism has been thriving in China in recent years, contributing remarkably to the revitalization of the countryside. Photo: FILE

The report to the 19th CPC National Congress proposed a rural revitalization strategy that prioritized prospering industries. Policymakers and experts have interpreted it in many ways.

They have mainly stressed the unique value of the countryside for food security and the importance of the following: having an effective supply of agricultural products; enhancing the versatility of agriculture and fostering businesses for rural industrial development; boosting the integrated development of the primary, secondary and tertiary industries; improving farmers’ incomes and living standards during urban-rural integrated development through reform and innovation; and coordinating with other rural revitalization objectives. The latter is important because industrial thriving forms the basis of rural revitalization.
Existing studies have provided valuable references for correctly understanding prospering industries and making suitable policies and measures. Nonetheless, the boundaries of industrial revitalization in the countryside haven’t been clearly defined, since organic relations between urban and rural industries have been neglected.

Agriculture and related industries

The countryside is a spatial concept relative to cities, while an industry consists of businesses producing similar products or services within the national economy. According to the Industrial Classification for National Economic Activities, the countryside encompasses agriculture and all of the secondary and tertiary industries.

Broadly speaking, rural industrial revitalization includes the revitalization of all industries outside of cities. However, if those countryside industries regarded as urban economic activities in statistical terms are incorporated—such as mining, electric power, transportation, and countryside real estate—then the policy goal will drift off course and become impractical.
In developed nations, the share of agriculture in the national economy has been falling. It is a basic law that the proportion of the working population in agricultural production will decrease to 5 percent, but those providing various services in agriculture account for a larger proportion of the population than those directly engaged in production.

The share of Chinese agriculture in the GDP is also declining year by year. In 2017, the primary industry accounted for 7.9 percent of the GDP, yet in 1978 the figure was 36.8 percent, dropping by 28.9 percent over four decades.

In recent years, the status of industries closely related to agricultural production, such as agricultural product processing, leisure agriculture, rural tourism and rural e-commerce, has been on the rise.

In 2016, the operating revenues of the agricultural product processing industry exceeded 570 billion yuan. There were 330,000 business entities in leisure agriculture and rural tourism, grossing nearly 620 billion yuan. Rural e-commerce earned revenues of 894.5 billion yuan, with more than 7 million innovative and entrepreneurial workers returning or going to the countryside.

Nevertheless, these industries remain subordinate to traditional agriculture, so the boundary for rural industrial revitalization should be laid at agriculture and related industries.
Optimization of industrial layout
According to John Friedmann’s core-periphery model of development, the core and the periphery are not equal, since the core is predominant. He argued that regional economic development and spatial structuring feature four stages: pre-industrialization, early industrialization, mature industrialization and post-industrialization.

Prior to post-industrialization, rural production factors flow to urban areas to realize balanced regional development. While the countryside is a spatial carrier for agriculture, cities are where modern industries cluster. Rural industrial revitalization is essentially the optimization of the spatial layout of industries in rural and urban areas.

It was estimated that China entered the second half of the later stage of industrialization on the whole in 2015, with 3 provinces characterized by post-industrialization, 16 provinces entering the later stage of industrialization and 12 provinces in the middle stage.

Industrialization is associated with urbanization. Over the 40 years since reform and opening up, rapid urbanization has been a major change in the Chinese economy and society. In 1978, the urbanization rate was 17.9 percent, and it reached 58.5 percent in 2017, up 40.6 percent.
However, judging from urbanization in developed countries, the process is far from over in China. In 2018, the global urbanization rate was 55.3 percent. Among other nations, the rate of developed countries or regions reached 78.7 percent, while that of high-income nations arrived at 81.5 percent and middle-high-income countries urbanized at a rate of 66.6 percent.

Among the members of the Organization for Economic Cooperation and Development, the urbanization rate of the United States was 82.3 percent, that of Japan was 91.6 percent, France 80.4 percent, Canada 81.4 percent, and the United Kingdom 83.5 percent. Generally their urbanization rates were 20 percent higher than that of China in 2017.

Economic and social development varies greatly from region to region in China. Each region is endowed with different natural resources, so rural industrial revitalization should be grounded upon the optimization of the regional and urban-rural industrial layout.

In 2004, the Central Work Conference concluded that China had basically entered the development stage in which industry propelled agriculture and cities drove the countryside. In 2008, the third Plenary Session of the 17th CPC Central Committee made it explicit that coordinating urban-rural industrial development should be regarded as an important aspect in establishing a system to advance integrated urban-rural economic and social development.
Thus rural industrial revitalization should consider cities and the countryside as a whole when making comprehensive plans and aim to form an industrial system featuring matched regional resources and coordinated urban-rural development.

 Farmer-based value chain
China has entered a critical stage for building a moderately prosperous society. The country must solve how to increase job opportunities and incomes for rural farmers in order to lead them into that new society simultaneously.

Also, China is a populous country with less arable land. Small-scale household farms are fundamental to agricultural production. Currently, the number of rural households managing less than 10 mu (0.0667 hectares) of cultivated land is estimated to reach 210 million, accounting for 79.6 percent of total cultivated land.

In the meantime, costs for agricultural production are rising year by year. Domestic grain prices have been higher than in the international market, so low returns are generated from agricultural production. The objective of many small farmers is to support themselves. If they want to increase their incomes, they have to work in cities or do business. The rural industrial structure and the employment structure of the labor force are seriously mismatched.
Regarding the employment structure of the labor force, in 2017 agriculture accounted for 27.7 percent, industry took 28.8 percent and the tertiary sector occupied 43.5 percent. This is the fundamental reason for farmers’ low incomes.

Therefore it is vital to carry on urbanization and reduce the rural population in order to align the rural industrial structure with labor force employment. Meanwhile, even if in 2035 when preliminary modernization is attained with a peak of 1.5 billion people at an urbanization rate of roughly 70 percent, there will still be 450 million people working and living in rural areas. How to ensure the income level and living standards of these famers comparable to those of urban residents would remain an essential problem for rural industrial revitalization.

Generally Chinese farmers have little education. With a weak ability to compete in the modern market economy, they are at the low end of the industrial value chain. Rural industrial revitalization should be based on farmers to lift their status in the chain, thereby narrowing the gap between urban and rural residents in terms of life quality and making the countryside more attractive to new generations of farmers to live and work in.

Policy suggestions
Openness and inclusiveness are basic features of the modern economic system. Rural industrial revitalization should make fuller use of the international market to actively participate in the global industrial division of labor and the reallocation of the global value chain. Enterprises should expand outbound agricultural investments, quicken the pace of agriculture “going global” and make open economic policies for agriculture through more effective trade measures. It is likewise important to advance the construction of free trade zones to promote enterprises’ outbound agricultural investments and the liberalization and facilitation of agricultural trade.

“Bringing in” is as important as “going global.” It is necessary to bring in foreign capital to boost rural industrial development. China not only has a huge demand for grain, but is also a trade power. Ensuring the security of grain and agricultural industries should be a basic strategy of rural industrial revitalization.

In the future, efforts should be made to reinforce trade remedies, compensations and foreign capital regulation. China should more actively use anti-subsidy, anti-dumping and industrial support measures allowed by WTO rules to advance trade remedies. A security review system for foreign capital entering the agriculture sector should be built and implemented to strengthen regulation over foreign services in agricultural industries and formulate anti-monopoly laws and regulations suited to the characteristics of rural industries.

Liao Yongsong is a research fellow from the Rural Development Institute at the Chinese Academy of Social Sciences.

(edited by CHEN MIRONG)