Public Disclosure Authorized f.. K ~Rural~ t.J.3Development in Public Disclosure Authorized Dwight Perkins j Sha hid Yusuf A WoRLD BANK PUBLICATION Public Disclosure Authorized ;.q ~ ~ Am f Report No..:11157.Eu Type: (PUB) .Title: RURAL DEVELOPMENT IN CHINA Auxthor:PERKINS, DWIGHT 'E,xt.: 0 Room: Dept.: OLD PUBLICATION 1984 Public Disclosure Authorized Rural Develapment in China A WORLD BANK PUBLICATION Njo. Province So- 9 0- 100 ° Iio- 120h,t 130-4%8 l. Hebilogin -50 ° U. S. S. R.7V,XI 4 ~ HN HebeihmXo( 5'~~~~~~~~~~O Beijing <-)Shi8M1 'gS mBZS 6 ShiJKrnugUrotnialncaitl Shandtonlngndris-- U 8'~~~~~~~~~~~ Jiags MONOPLIA.g Rural Development in China Dwight Perkinsand ShahidYusuf PUBLISHED FOR THE WORLD BANK The Johns Hopkins University Press BALTIMORE AND LONDON Copyright C 1984 by The International Bank for Reconstruction and Development/The World Bank 1818 H Street. N.W., Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing November 1984 T'he Johns Hopkins University Press Baltimore, Maryland 21218, U.S.A. The World Bank does not accept responsibility for the views expressed herein, which are those of the authors and should not be attributed to the World Bank or to its affiliated organizations. T'he findings, interpretations, and conclusions are the results of research supported by the Bank; they do not necessarily represent official policy of the Bank. T'he designations employed, the presentation of material, and any maps used in this document are solely for the convenience of the reader and do not imply the expression of any opinion whatsoever on the part of the World Bank or its affiliates concerning the legal status of any country, territory, city, area, or of its authorities, or concerning the delimitation of its boundaries or national affiliation. Editor Virginia de Haven Hitchcock Maps World Bank Cartography Division Figure Catherine Ann Kocak Binding design Joyce C. Eisen Library of CongressCataloging in Publication Data Perkins, Dwight Heald. Rural development in China. "Published for the World Bank." Bibliography: p. Includes index. 1. Agriculture and state-China. 2. Rural development- Government policy-China. 3. China-Economic policy- 1976- . 4. China-Social policy. I. Yusuf, Shahid, 1949- . II. 'T'itle. HD2098.P47 1984 338.951 83-49366 ISBN 0-8018-3261-6 Contents Preface ix 1. Introduction 3 Characteristicsof China's Rural DevelopmentPolicies 4 Purpose and Organizationof the Book 6 2. China's Dual Economy 9 Evidencefrom the GovernmentBudget 13 Agriculture and Foreign Trade 21 Industry's NonbudgetaryContributions to Agriculture 23 Conclusion 27 3. Agricultural Production 30 Growth Rates of AgriculturalOutput 31 Grain versus Cash Crops 36 China's Grain YieldsCompared 37 4. Sources of Agricultural Growth 45 The AnalyticalFramework 46 HistoricalPerspective on the Traditional Inputs 48 Increasesin Modern Inputs 51 The Role of Rural Small-scaleIndustries 61 EstimatingFactor Productivity 65 Conclusion 69 5. Organizational and Institutional Changes 73 The Decisionto Collectivize 74 Internal Commune Organizationafter 1960 78 Relationsbetween the Team and the Governmentafter 1960 83 V vi CONTENTS The Sources of China's Implementation Capacity 87 The Chinese Experience as a Model of Development 98 6. Income Distribution 105 Definition of Terms 106 Income Distribution within Rural Areas 108 Income Differences between Rural Areas 115 Policy Tools to Redistribute Income 119 Income Differences between Rural and Urban Areas 124 Conclusion 128 7. Health Care 131 Historical Background 131 Rural Epidemiology before 1949 133 Strategies for Disease Control 134 Development of a Public Health Infrastructure 138 Rural Epidemiology in the 1980s 143 Present and Future Strategies for Health Care 145 Conclusion 156 8. Education 161 Traditional Education 161 The Beginnings of Modern Education 163 Swings in Education Strategy 167 Literacy Campaigns 170 Primary and Secondary Education 172 Tertiary Education and Skilled Manpower 183 Current Problems and Future Concerns 183 9. Lessons from Experience 194 Reorganization of Rural Society 195 Public Health 196 Education 197 Agricultural Production 198 Distribution of Income and Welfare 199 A Look to the Future 200 Appendix A. Provincial Data 203 Appendix B. Estimating the Marginal Product of Labor 209 Appendix C. Additional Data and Derivations 212 References 215 Index 229 FIGURE 1. Quotasand the GrainMarket 20 CONTENTS vii TABLES 2-1. Share of Agriculture in NAetMaterial Product I1 2-2. Population in Urban and Rural Areas 12 2-3. Sales of Grain 12 2-4. GovernmentRevenues and Expenditures 13 2-5. Share of Agriculture in Capital ConstructionInvestment 14 2-6. State Expendituresand Credits to the Agricultural Sector 15 2-7. Share of Farm Machinery, ChemicalFertilizer, and Pesticides in Heavy Industry Investment 15 2-8. Share of Accumulation in Aational Income accordingto ChineseDefinitions 16 2-9. Retail Sales in Rural and Urban Areas 18 2-10. Compositionof ChineseExports 22 2-11. Purchasesand PurchasePrices of Agricultural Products 25 2-12. Retail Price Indexes 26 2-13. Real Growth Rates of Retail Sales 27 3-1. GrossValue of Agricultural Output 32 3-2. Agricultural ValueAdded 33 3-3. Agricultural Growth Rates 33 3-4. Grain Output 34 3-5. Growth Rates of Agricultural Products 35 3-6. Share of Various Crops in Sown Acreage 36 3-7. International Comparisonsof Grain Yields 38 3-8. Rice Acreage, Output, and Yield 39 3-9. Sown Acreage in Grain Crops 40 3-10. Grain Yields and Growth Rates 40 3-11. Compositionof Increasesin Grain Output 41 4-1. Acreage Data 52 4-2. International Comparisonsof Arable Land per Capita 52 4-3. ChemicalFertilizer Production and Imports 54 4-4. International Comparisonsof Agricultural Inputs 55 4-5. Rural Labor Force 58 4-6. CollectiveIncome per Capita, per Day, and per Mu 58 4-7. Rural Electric Power Consumption 59 4-8. Agricultural Mechanization 60 4-9. Small-scaleEnterprises Run by Communes and Brigades 62 4-10. Share of Small Plants in Total Output 62 4-11. Estimates of the Productivity Residual, 1957 to 1979 68 5-1. The Structure of Communes,Brigades, and Teams 93 6-1. Distribution of Rural Income beforeand after Land Reform 108 6-2. Distribution of Income beforeand after Collectivization 110 6-3. Income and Productper Capita, by Province 112 6-4. Differencesin Rural Income within Provinces 113 6-5. HypotheticalDistribution of Rural Income 114 V22i CONTENTS 6-6. Mtfeasuresof Disparities in Income and Productivity betweenRural and Urban Areas 125 6-7. Consumptionper Capita in Urban and Rural Areas 126 7-1. Number of Western-stylePhysicians 146 7-2. Number of Medical Personnel 146 7-3. Number of Hospitalsand Hospital Beds 146 7-4. Comparisonof Medical Personneland Hospital Beds in the Entire Country and in Shanghai, 1978 147 7-5. Health Care Personneland Hospital Beds, 1979 148 8-1. Student Enrollments 178 8-2. Students per Teacher, by Level of School 181 A-1. Growth Rates of Population and Grain Output, by Province 204 A-2. Population Data, by Province 205 A-3. Grain Output, by Province 206 A-4. Cultivated Acreage, by Province 207 A-5. Grain Yields, by Province 208 B-l. Data Used to Calculate the Marginal Product of Labor 210 C-1. Acreage Data Used in Regressions,by Province 213 C-2. Componentsof Gross Value of Agricultural Output, by Province, 1979 214 MAPS Frontispiece. China ii 1. Growth Rates for Grain Output, 1957 to 1979 42 2. Average per Capita CollectiveDistributed Income, 1980 116 3. Counties and Districts with High per Capita CollectiveDistributed Farm Income, 1980 117 Preface WVHEN CHINA BEGAN to discuss the possibility of joining the Wlorld Bank almost six years ago, the Bank knew little of the economy and institu- tions of the People's Republic. Interest quickened as the Bank prepared to welcome the world's most populous nation into its midst, and thus we were asked to survey and synthesize the available information on rural development in China so that it would be accessible to the widest possible audience within the Bank. Even as the first draft was taking shape, however, the Chinese gov- ernment began to release detailed statistical information on agriculture. In one stroke it made obsolete the informed speculation on which had rested much of the existing analysis of how the rural sector had evolved, what its strengths were, and how severe its remaining problems were. We were encouraged to go beyond encapsulating past work and to make a fresh assessment of China's rural development strategy. Much has been written on the various facets of Chinese rural develop- ment, and, no doubt, one can expect a steady stream of publications to augment this already handsome stock in the years ahead. But the individual seeking a brief self-contained introduction, which threads together the diverse topics embraced by the field of rural development and which effectively uses newly released data to refine and extend the accumulated knowledge, is likely to suffer some frustration. The volume of literature on the subject is, at first brush, overwhelming, but for one seeking an informed and comprehensive introduction and with- out the appetite to wade through a score of specialized treatises, the .x X PREFACE offerings are quite meagre. It is our hope that we have taken a modest step toward filling this gap and, at the same time, have written a book that even those familiar with the Chinese economy may find of use. This study has evolved over several years, and we are grateful to all those who encouraged and guided us through the successive phases. Hollis Chenery has our special thanks. While at the World Bank, he perceived the need for such a study, pointed us in the right direction, and encouraged us to attempt something appreciably more ambitious than a survey of the literature. We are also indebted to Shahidjaved Burki for his unstinting support and advice through the duration of the project.