Urbanization Policy Evolution and County Economy in China

Context

Recently, China has issued guidelines for urbanization with a focus on county towns, which is an important part of China’s five-level administration (including provinces, prefecture-level cities, counties, townships, and villages). Half of China’s population lives in counties, and the majority of the rural population’s 500 million people still live in rural areas affiliated to counties.

What is the aim of the new guidelines? According to Professor Wen Tiejun, it is to promote the transformation of China’s urbanization model from a mega cities orientation to an integrated urban-rural (城乡融合 chéngxiāng rónghé) model in line with the rural revitalization (乡村振兴 xiāngcūn zhènxīng) strategy.

Key points

> Although the level of urbanization rose from 15 percent to 30 percent in the decade after 1985, the reality is that rural land has been transformed into urban land, while the rural population has not been urbanized. The people who work in the towns and cities could not enjoy the same social security benefits as the urban population living in them. Following the tax sharing reform (分税制改革 fēnshuìzhì gǎi gé) in 1994, local tax revenues fell sharply and land concessions became an important source of supplementary funds for local governments, with some coastal areas deriving more than 80 percent of their local government revenue from land transfer.

> In the past, China’s urbanization was mainly driven by the development of mega cities in the Pearl River Delta and Yangtze River Delta through concentrating capital and labour in an export-oriented economy. This developmental model, however, resulted in massive unemployment when faced with external financial crises. For example, the closure of factories along China’s coastline, due to the financial crisis in 2008, resulted in over 20 million people losing their jobs.

> Today, China is shifting towards developing urban-rural integration within the county-level economy, recognizing the importance of keeping industries in the counties to provide peasants with employment, and to achieve a local urbanization (就地城镇化 jiùdì chéngzhènhuà). It is also important to change old ideas and encourage urban populations to leave the cities and go to towns and villages.

> An example is Yu Village in Anji County, Zhejiang Province, which has been designated a provincial model of common prosperity. The village has shifted from a “mining economy (矿山经济 kuàngshān jīngjì)” to an ecological economy (生态经济 shēngtài jīngjì), and developed a leisure and tourism industry. Not only are more than 800 local villagers employed, but 3,000 citizens from Shanghai have been attracted to this village, as well as 182 foreigners.

Summary

The author points out that this new type of urbanization should enable peasants to obtain long-term property income such as equity income from collective cooperatives. Through developing new industries in the counties that are conducive to the “dual carbon” (双碳 shuāng tàn )goals, and promoting joint entrepreneurship between peasants and city dwellers, people can find employment in their hometown so as to achieve local urbanization. Rural revitalization is the “ballast stone (压舱石 yā cāng shí)” for China’s response to the challenges of globalization, while moving to a a new developmental model in which domestic circulation (国内大循环 guónèi dà xúnhuán) plays a dominant role. Local urbanization in counties should become the main direction of rural revitalization.

Source: Chinese Voices｜No.45 | 22.05.2022. ‘Why is China focusing on county towns for this urbanization phase?’ dongshengnews.org/en/chinese-voices-no-45-en/

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Full Article

Professor Wen Tiejun, considers the topic of urbanization is discussed from two aspects, the first is the historical evolution of the concept of urbanization; the second is the county economy and local urbanization.

The historical evolution of China’s urbanization

Since the 1980s , China’s urbanization has grown almost every decade. However, urbanization originally originated from the introduction of foreign equipment and technology in the 1970s to improve the original industrial structure of China, which was more “ heavy and military ” . Because the rural commune and brigade economy plays an important role in earning foreign exchange through exports, the central government has made a so-called ” dual- track ” policy arrangement for commune and brigade enterprises to provide unplanned loan quotas, foreign exchange retention, and raw materials ; Migrant farmers in economically developed areas and the early form of rural urbanization. Therefore, the rural urbanization at that time was largely directly related to the changes in the national industrial structure.

In 1982 , the household contract responsibility system began to be implemented nationwide, and a large number of laborers turned to rural industrialization. By 1985 , township and village enterprises had obtained new conditions for development, and the demand of farmers to enter the city was more urgent, which also made the ” opening of urban and rural areas ” officially enter the research and internal discussion of policy departments. At that time, some departments believed that the entire financial and taxation system of the city had not been reformed, and that almost all the urban population from birth to death was still within the national security system, and each additional urban population would increase a financial burden. Therefore, the 1986 document only proposed “allowing peasants to take care of their own rations and enter the cities to work and do business”.

It can be seen that in the initial stage of urbanization in the early years, it should be said that the main problem is not whether there is such a law in the economy, but that the reform conditions that are conducive to the development of rural industrialization and peasant urbanization have not been formed in the system.

Since then, due to the severe inflation caused by official hoarding and “price breakthrough” in the mid-to-late 1980s, and the economic depression that was exacerbated by the United States leading Western countries to completely block China in the early 1990s , the raw materials and funds were unprecedentedly tight, resulting in no longer Most of the township and village enterprises with policy protection went out of business and closed down. In that case, although the urbanization development strategy was proposed, it has not been fully implemented. In 1995 , more than a dozen national ministries and commissions jointly formed an urbanization research research group. I was the leader of the agricultural research group at that time. When we were doing research, we emphasized that the main obstacles at that time were still concentrated in the two factor markets of urban and rural areas. Factors cannot flow freely.

Ten years after the rural policy department discussed the opening of urban and rural areas in 1985 , no matter what the relevant departments discussed about the urbanization model, in the context of a severe macroeconomic depression, the local government’s fiscal and tax revenue was very tight, and in fact urbanization has become “” “Urbanization of land” and de-urbanization of the population – the large-scale acquisition of land by local governments is mainly used to supplement local finance, and more than 80% of local finance in some coastal areas comes from land acquisition. This objectively makes the agricultural resources owned by the agricultural population even more scarce. Therefore, although the urbanization rate increased from 15% in 1985 to 30% during this period, in fact the urbanization at that time was deviated. After the “tax-sharing system reform”, the proportion of local tax revenue dropped significantly, and “the increase in land prices will return to the public.” There are no conditions for the realization of the principle of ”, and local governments have occupied a large number of land resources in urban and suburban areas and developed coastal areas, and the income from land sales has been spent by local governments.

Since the establishment of the research group in 1995 , after ten years of research, it is still difficult to unify into one opinion, so the output of six different development modes of urbanization in China has been formed.

Then, because the ” three rural ” issues became the top priority of the party and the country at the beginning of the 21st century , by 2005 , the central government listed the national strategy of ” building a new socialist countryside ” as eight major items in the national ” Eleventh Five-Year ” development plan. At the top of the development strategy, the agricultural sector immediately proposed “promoting the coordinated and coordinated development of urban and rural areas”, so General Secretary Hu Jintao accepted the policy suggestion that ” urbanization is the main mode of China’s urbanization development ” . Coordinated development of cities and small towns”, the central government officially affirmed urbanization. At that time, the policy incorporated into the construction of the new countryside was that there should be two important pillars for the development of the county economy: one is the development of small and medium-sized enterprises, and the other is the development of urbanization. Because the threshold for small and medium-sized enterprises to enter cities and towns is much lower, the relative concentration of small and medium-sized enterprises relies on the concentration of small and medium-sized enterprises in cities and towns, thereby promoting the county economy.

County Economy and Local Urbanization

Here, it needs to be reiterated that “urbanization is different from urbanization”. ” Urbanization ” cannot simply be translated into English “Urbanization” (urbanization), it can be expressed as Townization (urbanization), not Urbanization , because urbanization and urbanization in China are two different things.

On the one hand, urbanization is one of the paths for us to realize urbanization; on the other hand, it is also an important part of the county economy in a certain stage.

It has been 15 years since the ” New Countryside Construction ” of the Fifth Plenary Session of the Sixteenth Central Committee in 2005 put forward the county economy, and the fifth plenary session of the Nineteenth Central Committee in 2020 put forward the county economy again . Since the county economy has become an important part of the fifth plenary session to turn to the domestic cycle, the second topic of my report is ” county economy and local urbanization ” .

The Fifth Plenary Session of the 19th CPC Central Committee emphasized that we should transform the past active integration into globalization into a new stage of development with the domestic cycle as the main body. What is the important content of the domestic cycle as the main body? Of course, rural revitalization bears the brunt.

Therefore, the five-level party committees and the party and government are now required to take the same responsibility for ” rural revitalization ” , not only as a national strategy, but also as a “ballast stone for coping with the challenges of globalization”.

In the past 15 years or so, China’s economy has mainly relied on the ” three to one supplement ” processing trade-oriented export-oriented economy, many of which are  ” rootless capital ” , and a relatively large number of them are concentrated in coastal industrialized areas. The development of urban agglomerations is driven by the accumulation of industrial capital, so there are key urban agglomerations such as the Pearl River Delta and the Yangtze River Delta. Of course, there are also inland areas, such as Changsha’s development model that drives the surrounding areas as mentioned by President Wang just now. In conclusion, our urban agglomeration is highly correlated with outward-facing industrial clusters.

The problem is that in the past , the export-oriented economy of ” three to one supplement ” imported a large amount of raw materials and exported processed products; this development method is inconsistent with the current bottom-line thinking! Because China has been sanctioned as the main competitor of the United States, these regions with high foreign dependence , the development mode that relies on the export-oriented economy will definitely be hindered by Western sanctions. Therefore, the more cities that rely on a large amount of imported raw materials, especially those concentrated in coastal cities that lack self-sustainability, the more serious difficulties will appear.

As we all know, we encountered the East Asian financial crisis in 1998 , the Wall Street financial tsunami in 2008 , and the BRICS economic crisis in 2014. These three relatively serious external crises have all brought about tens of millions of domestic large-scale unemployment. In 1998 , more than 40 million people lost their jobs, and in 2009 , more than 20 million people lost their jobs. In 2018 , the Trump trade sanctions and the new crown pneumonia outbreak in 2020 caused more than 30 million workers to lose their jobs. Therefore, from this point of view, it is unsustainable to rely on coastal cities to carry excess population to pursue high-speed export-oriented growth.

Therefore, the Fifth Plenary Session of the 19th Central Committee emphasized ” bottom-line thinking ” and established that ” rural revitalization ” is the ” ballast stone ” for us to cope with the challenges of globalization and a grand strategy of turning ” domestic circulation as the main body ” . Then, in which direction should the urbanization and county economy be adjusted under the major national strategic transformation?

What needs to be further discussed is that in the past, our urbanization was actually based on large urban agglomerations. Now we need to turn to the integration of urban and rural areas in the county economy. Only by developing county towns can we build appropriate business conditions for small and medium-sized enterprises to absorb farmers’ employment. , especially rural in-situ urbanization, should become the main direction of rural revitalization. From this point of view, the previous theoretical research, policy ideas and even various rules and regulations also need to comply with the “three new”: they must be adjusted to a new stage and obey the construction of a new pattern, which especially requires new idea.

When talking about the rural revitalization strategy, the leaders especially emphasized “the harmonious coexistence of man and nature”, paying attention to ecological industrialization and industrial ecologicalization, and previously proposed “deepening ecological capital”, which is a new development concept to promote transformation in the new development stage .

Ecological industrialization and industrial ecologicalization are generally based on the geographical resources and environmental conditions, with relatively complete county geographical units to support the “three full (full region, all-round, full process)” systematic development of ecological resources, thereby realizing On-site urbanization with the development direction of the domestic cycle as the mainstay plays a supporting role.

For example, in Zhejiang, which was established by the central government as a demonstration province for common prosperity, and where the concept of ” Two Mountains ” was proposed, Yu Village, Anji County, Zhejiang Province has actually been urbanized on the spot, because there were only more than 800 original villagers in the village, and Shanghai came to the village. There are 3,000 citizens going to the countryside and 182 foreigners. From the current population composition, Yu Village has achieved local urbanization.

The reason for the significant increase in the urban population is simply that the peasants who entered the city were changed to the urban population, and the 6 -month residence and part-time jobs were counted as the urban population in the statistics. So, we are now close to 66% of the urban population. However, we do not apply the same criteria to citizens going to the countryside. For example, should living in the countryside for more than 6 months be counted as a rural population? In fact, these villages inhabited by local urbanized citizens have relative conditions that can meet the general urbanization requirements .

We should break the limitations of the old-fashioned urbanization development mode, encourage citizens to go to the countryside, and allow villages with a certain population size and proportion of non-agricultural industries to realize local urbanization. Because in the past, the towns were also divided according to the size of the population and the value of industrial output. At present, the added value formed by the integration of primary, secondary and tertiary industries and even the integration of fourth, fifth and sixth industries in rural areas may have already surpassed that of pure primary agriculture. In these places, if a certain proportion of the migrant population, especially the urban population, goes to the countryside, they should support the local urbanization of these places. What’s more, Huaxi Village has a population of more than 100,000 people and has an output value of tens of billions. In fact, 20 surrounding villages have been merged to form a large-scale geographical area, which is still called ” village ” . They call themselves ” Huaxi Xinshi Village ” . This is also an institutional innovation to prevent bureaucratic formalism from a practical perspective, because once it is called a ” city ” or ” town ” , it is necessary to set up a government and various urban management units, which will increase the abnormally high management costs.

Therefore, in-situ urbanization must allow the formation of innovations in various management models, and innovations in multi-subject interactive and participatory governance methods, rather than simply copying the government system that manages cities to the local economic requirements of the county. urbanization.

This time, the Fifth Plenary Session of the 19th Central Committee of the Central Committee clearly emphasized that ” the industry should be kept in the county area, and the farmers should share the benefits of the industry in the county area . ” ” Goals ” to realize the policy idea of ​​” let farmers obtain long-term property income ” , which is by no means secondary distribution, but primary distribution.

Therefore, the so-called ” county economy ” should be based on the systematic planning and overall development of spatial ecological resources within the county to realize the ecological construction of “three comprehensives (all regions, all directions, and the whole process)” emphasized by General Secretary Xi Jinping. In order to make the county industry into a new industry that does not damage the ecological society and is conducive to the ” two carbon ” goals, it must be a comprehensive system that adapts to the sustainable development of the county’s diversified resources.

It can be seen that the most important areas for the development of new-type urbanization are the “ecological industrialization and industrial ecologicalization” in the county economy. Through the industrial income left in the county, farmers can obtain long-term property income in one distribution. . Second, the key to promoting the integration of urban and rural areas in the county is the free flow of urban and rural factor markets. With the help of financial supply-side reforms to promote the value of rural ecological resources, to promote financial integration, to promote joint entrepreneurship between citizens and farmers, and to achieve localization with ” mass entrepreneurship and innovation ” urbanization.

Finally , when interpreting the spirit of the fifth plenary session of the 19th central committee , general secretary xi not only talked about ” three new ( new stage , new idea , new pattern ) ” , but also emphasized that if we do not have new ideas , it is impossible to build new pattern. Therefore, I hope that this seminar can take the ” three new ” as the guiding ideology, guide everyone to say goodbye to the “three old”, and make the efforts we should make towards the strategic direction of ” new stage “>

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This article is the full text of the report made by Wen Tiejun, a professor at Renmin University of China, at the 2022 Spring Forum of the China City Hundred People Forum “County Regions, County Towns, Local Urbanization”. 

Author: Wen Tiejun (温铁军), is an economist and professor at the China Rural Construction Institute of Southwest University, China.

Source: Rural Construction Research, 9 May, 2022. 乡村建设研究 https://mp-weixin-qq-com.translate.goog/s/pN5zoG6bWH2p49qeTNpcfA?_x_tr_sl=zh-CN&_x_tr_tl=en&_x_tr_hl=en-GB