President Xi Jinping has called for nationwide efforts to emulate the transformation of East China’s Fujian province to “build a beautiful countryside” with a pleasant living environment, as urbanization and poverty alleviation continue. There is also the need to improve the quality of life for all rural residents. So, what does the trial experience mean for Chinese rural development? Will the Zhejiang model be applicable in the new Chinese rural revitalization strategy and how should tradition and modernization be balanced in the national rural development
This interview is part of Yang Rui’s “Dialogue” on CGTN. The main topics discussed were Chinese rural economy and its development. On the basis of the experiment in the rural areas left behind by the industrialization, Xi has announced a plan in order to “beautify the countryside,” on the model of the Zhejiang one. I do explain some important factors and information to take in mind in order to understand if this new task can be achieved.
Other than the unique location of Zhejiang, which is of course very close to other proud prosperous places like Shanghai or others in the Yangtze River Delta region. What’s special about this place and what are the things that people like Mr Xi Jinping should be so proud of? What do you think of the Zhejiang entrepreneurship and diligence of the locals, which I believe must have contributed enormously to the prosperity of Zhejiang?
We study in Europe the famous Wenzhou model, one of the cities in the southern part of the Zhejiang, on the border with Fujian. This group of people have managed, as you know, to grow out of difficult economic situations. I’m Italian and I see that we have a lot of migrants from Wenzhou who come to Italy, around 400,000 Wenzhou people live in Italy and even in Italy, they continue this tradition of hard-working. They maybe start with opening restaurants, importing clothes and computer, just as it was in the 80’s. Now we have second generation Chinese from Wenzhou who graduate from the top business schools in Italy, like Bocconi. In such a short period of time, within one generation, they changed from migrant, going to seek fortune, to having children almost at the top of the Italian economic society. This is, in my opinion, unprecedented in the history of migration. We had migrations in the US, but it took longer. Here we have a very strong and very quick recognition of the skills, like you said, the entrepreneurial spirit, in a way that wherever they go they will be successful.
In this a stage of the social development, I’m afraid another aspect of the transformation concerns ideology. In the first three decades, in particular, I believe the private market and the non-public sector of the Chinese economy have benefited enormously allegedly from Deng Xiaoping’s sense of pragmatism. Today the die-hard conservatives, the neoliberal ideology is very dangerous. The official ideology goes against capitalist ideology, like the liberal market economy, central planning is tightened and strengthened, so what do you think of what the next steps of the non-public sector?
I teach and work at Nottingham University and Zhejiang SEO, in two different cities of Zhejiang, Hangzhou and Ningbo. I do think that people in Zhejiang go beyond ideology. They’re mostly driven by making money, like most of the people in the world. Thus, they will adapt to whatever is the decision and the plan from the central government or from the local government, just as it happened in Wenzhou many years ago. Because it should be remembered that Wenzhou was so successful because the region was geographically a little bit isolated, the fact that it was a little bit left out from the development of the new age, where the reform started. So, the people from Wenzhou decided that they needed to do something for themselves. Ningbo is the biggest cargo port in China and in the world and so, despite the challenges that we have, like increased tariffs, the trade war with the US or whatever, it is still a great example of how the region is driven by economic objectives and how these are always met.
What do you think of the farming land? Farmers who will use their farming land, namely their properties, to enrich their lives, to get rich. However, the land cannot be sold for commercial reasons.
No, not yet. We’re now looking at the reform, so let’s remember that China is a big country with 1.3 billion people. Thus, reforms need to take their own speed and we have seen very great improvement thanks to the land reforms. I travelled to Guizhou a few years ago, in order to do some analysis, and what we’re looking at is that in China every rural citizen is allocated with about 2 mu of land. We are talking about 1,400 square meters each people and they do not have the rights to sell it, but they have the rights to use it. In the early 80’s these rights of use were only for 15 years and then when they were close to the expiry, the government extended the lease for free for an additional 30 years. Now we are at 45 years in total, it has become almost close to the expiry date of the second term and most likely there will be a further extension. Thus, while from a legal point of view farmers do not have the right of ownership, they do have the right of use and in the last few years, we have also seen farmers renting their pot of land. You mentioned the people from Liaoning, Dongbei, Shenyang because these industrial provinces in the northeast were heavily hit by the financial crisis and so people moved to the urban areas. Their lands were left uncultivated and they probably did not use it in an efficient way, so they did try to reallocate the land. In this way, people who had moved to the city handed over the piece of land to those who were left behind. Somehow, this is a very good way to make the average productivity go up. As one of the main problems of the Chinese rural economy is that the low scale of the operation, as I said 1,000 square meter/person, is not enough to have economies of scale. Now, when the people moved to the city, the land was relocated and the average land, the per-capita, grows. Even though we will not reach the size of the US, with hundreds or thousands of kilometres of cornfields, however, in general, we get into a higher scale. Moreover, we shall not forget the point number eight of the China Manufacturing plan, which is about improving the agricultural machinery. In fact, other than having the bottom sorted, so the average land, you need to put the hardware on the top. The software is already there, because the farmers have the experience, if we get to solve the issue of land ownership or land usage and combine it with the improvement in the machinery, which is still a little bit backward, I think the country will be prosperous. Even now, the average income for the average farmer has grown by 100 times since 1978. In 1978, the average farmer was making 130 RMB per year and now it is 13000 RMB. I don’t know any country of the same size of China, that has managed to make the income of all the citizen grow by 100 times. When we talk about the Asian tigers’ miracle, it’s easier when you improve things in Singapore or even Malaysia, Vietnam, but when you do it for 1.3 billion people, 1/5 of the world, it is indeed different. China has raised its rural citizens’ incomes from 100 RMB to 13,000 RMB. This looks to me like an unprecedented economic and social success and when we forecast what will happen in the next future, we must not forget what has happened in the past.
These projects (namely, social services) would cry for money, China needs to have cash, needs a public spending and a big enough amount shall be provided. However, China spends so much money on military buildup and on maintaining social stability. Do you think it means more consumers will have to be taxed, more enterprises would have to be taxed?
No, I don’t think so. Let’s remember that China also spends a lot of money in the research and development field. An amount of 2.8% of the GDP goes into research, two times the Italian one and a little bit higher than what we do in Europe, on average even higher than Germany. This has been going on for a number of years and this is not money wasted. I make a joke when I teach finance to my students, one thing is spending money and the other thing is investing. Chinese people consume and that’s why consumption grows and that’s why GDP grows. You mentioned the Chongqing model, what the Chinese government is doing is a very smart way around. Instead of having people from the West moving to Shanghai, where they have to travel for 2,000 kilometres in order to stay in the Oriental Pearl city the whole year, for going back home once a year, and leaving the family behind, on the contrary, the government is urbanizing the West, so the farmers from the poorest areas of the West don’t need to go to Shanghai. With less labour in the Yangtze Delta region, China moves up towards service sector, which means less labour. Thus, the labour shortage that, the urban area will experience, because of the people remaining in Guiyang, Guizhou, will not be so important. Living closer to their hometown will allow people to go back to their families more often, this is the most important thing. Zhejiang will do very well anyway. If the job market losses labour force, it doesn’t matter, it will readapt even faster and move up the value chain, up to the service which requires less labour and more software.
What do you think about national food security strategy? I believe that’s also an important part of the revitalization strategy.
It is very important indeed. A normal country could rely on imports from other countries, but China is a big country and represents 1/5 of the world country, thus making everything a little bit more challenging. Thus, China needs to produce domestically. The soybeans tax is not going to represent a lot of money, we’re talking about tens of billion dollars, that the government can quickly reallocate in the budget. The Chinese budget is big, and China has an economic excess of 12 trillion US dollars. This trade war with the US represents very little money, so even when China adds taxes, it does not really change the propensity to consume. We shall also think about the kinds of products that China produces with soybeans, mainly two things: makes oil and feeds animals, mainly pork. Thus, soy very little is consumed directly by humans. For this reason, the large quantity that China imports, five times what it produces, is used in order to produce one-fifth of what it needs. Even though it means to change the production chain by substituting soybeans with other feeds, it can be done little by little. In addition, soybean is not the main thing, China also has rice, corn, pork and more.
The challenge is the second generation of the home-based SME and prizes. These guys, they love the lifestyle of the middle class in Italy, in France or in Spain, in the United States. So, they hate living in the countryside surrounded by the white trash, the industrial wastes and therefore do you think to take the legacy of the small businesses would be a problem?
This is a little problem, but again two years ago it has been already addressed. Every time I talk to my Italian counterparts and to my European counterparts, I always have to cite numbers because only numbers give the exact idea and can show the magnitude of what China is doing. Investments in electric vehicles and in clean energy. China is going to have 35 million electric vehicles by 2025. This is N-times more than the
rest of the world will address. China is buying lithium and cobalt around the world to make the electric batteries; coal mines are very dirty and for this reason, are being shut down. The energy efficiencies or the energy per GDP is improving. Moreover, China went to Paris as the champion of global warming and seems to fight global warming more than the US and Japan.