China: Chongqing Urban-Rural Linkages Study

1. China: Chongqing Urban-Rural Linkages Study Paul Kriss, Water and Urban Sector Coordinator, World Bank China & Mongolia Sustainable Development Unit The World Bank

2. Analytical study with six components • Chongqing’s urbanization strategy in a spatial perspective • Overview of basic services • Review of rural income and agriculture • Review of the rural land policy • Overview of the hukou system • Skills development in Chongqing

6. Achieving inclusive urbanization: Chongqing’s urbanization strategy in a spatial perspective

7. Rapid growth and urbanization since 1997 Real GDP per capita growth Chongqing’s urban rate

8. But Chongqing remains a middle-ranking region… … characterized by large urban-rural disparities:Disposable income per capita (urban): 12,591 yuan Net income per capita (rural): 3,509 yuan Ratio urban-to-rural: 3.59

9. Urban-rural income disparity is similar to other Chinese regions at similar level of development Chongqing

10. But income gaps overall are larger than the average for China…

11. …and rural pension coverage is dismally low compared to rest of China

12. Policy objectives (CMG Master Plan) • Promote continued urbanization alongside narrowing of urban-rural disparities: • 2012: urban rate55 %; urban-rural income 2.2:1 • 2020: urban rate 70 %; urban-rural income 2:1 • Target resident population by 2020: • 1-hr circle: up from 16 mln to 22 mln • 9 central urban districts: up by 1/3rd to 9 mln This study provides a framework for thinking about urban-rural disparities and policies for inclusive urbanisation

13. Basic concepts: Development in 3D • Density:Intensity of economic activity per unit of land • Distance: costs of getting to places of opportunity (migration and commuting costs, costs of transporting goods to market, costs to rural residents of accessing services in urban areas) • Division: economic and social barriers inhibiting economic interactions

14. Development in 3D (continued) • Density • Productivity and well-being increase with increasing density • Reason: agglomeration economies • Distance • Productivity and well-being decrease with increasing distance to density • Division • Social and economic inequality (e.g., barriers reflected in existence of slum communities)

15. Chongqing’s Economic Situation in 3D • Relative economic standing explained by distance to density: “It is not as easy to build a business in Chongqing as in coastal Shanghai or Shenzhen, which benefit from access to overseas markets”(Guardian Newspaper, 15th March, 2006) • Rapid growth 1997-2006 partly explained by decreasing distance to density and investments in spatially connective infrastructure: “With its large pool of low-cost labour, sufficient water and energy resources and well-developed transportation infrastructure, Chongqing has comparative advantages in attracting labour-intensive manufacturing relocating from the coastal regions.” (OECD, 2007)

16. Urban-rural disparities: high density of urban areas and large distances of rural areas to this density *Per sq km, in 10,000

17. The most productive districts/counties are the most economically dense Same relationship for GDP per capita and at the sectoral level

18. Wages decline with distance to Chongqing city…

19. Evidence of stronger urban-rural synergies in more urbanized districts (1) • Primary sector productivity is higher in more urbanized districts/counties

20. Evidence of stronger urban-rural synergies in more urbanized districts (2) • Net income of rural residents is higher in more urbanized districts Source: calculations based on data from Chongqing Info Centre

21. Achieve inclusive urbanization by promoting balanced urban-rural development • Improve functioning of full portfolio of places • Exploit and enhance synergies between places: area-based approach to urbanization • Promote continued building of density, whilst integrating peripheral agricultural areas Historical experience: • Building of urban density is accompanied by convergence of living standards and gradual disappearance of urban-rural disparities • Chongqing’s aim:accelerate this process

22. Achieving inclusive urbanization • 3D – Build Density, reduce Distance, eliminate Division • Blind institution building • Connective infrastructure provision • Targeted slum upgrading/clearance/ relocation, place-specific initiatives Advanced  75 % Degree of urbanization /type of area • 2D – Build Density, reduce Distance • Blind institution building • Connective infrastructure provision Intermediate  50 % • 1D – Build Density • Blind institution building Incipient  25 % • policy principle: an “I” for a “D” Dynamic interpretation  guidance on sequencing of policy instruments

23. Achieving inclusive urbanization • 3D – Build Density, reduce Distance, eliminate Division • Blind institution building • Connective infrastructure provision • Targeted slum upgrading/clearance/ relocation, place-specific initiatives Advanced  75 % Degree of urbanization /type of area • 2D – Build Density, reduce Distance • Blind institution building • Connective infrastructure provision Intermediate  50 % • 1D – Build Density • Blind institution building Incipient  25 % Principle needs to be interpreted flexibly: e.g. trade-off between building new facilities in rural areas &  rural access to pre-existing facilities in more urban areas

24. Policy instruments to achieve inclusive urbanization • Spatially blind policies: • Universal provision of basic services (electricity, water, health, education) to eliminate inequalities • Flexible and efficient land and property markets • Improve law and order (definition and enforcement of property rights) • Improve access to credit markets • Spatially targeted policies: • Favour one locality over another • Spatially connective infrastructure: • Transport infrastructure reduces distances to density • Between settlements: Relocation of economic activities frees up space in urban areas for higher value added activities • Within settlements: Allows settlement to increase level of density for given level of congestion

25. Summary • Chongqing an intermediate urbanization area with lagging development and large urban-rural disparities • need to build density and reduce distance • Combination of spatially blind policies and spatially connective policies appropriate: • Fill gaps in provision/accessibility to basic services • Hukou reform • Reform of land and property markets • Strategic investments in transport infrastructure

26. Rural incomes and agriculture in Chongqing

27. Rural Chongqing • Declining resident population • Increasing rural-urban income gaps • Livestock based agriculture: meat, no dairy • Small farms: 0.10-0.14 ha per rural resident • Family income: 45% farming, 45% wages, 10% social transfers • All non-farming income from wages: very little entrepreneurial business income

28. Four approaches to raising rural incomes • Increases in productivity (output per unit of land or per head of livestock) – intensive approach • Increases in endowments (land, livestock, machinery, fertilizer) – extensive approach • Increases in commercialization: • improved access to market channels • shift to higher value-added products • Diversification into non-agricultural employment in rural areas

29. Overcoming the “curse of smallness” • Cooperatives (farmers’ associations) for product marketing and input purchasing: • Facilitating access to markets for product sales (grading, packing, wholesale facilities) • Facilitating access to purchased inputs (feed centers for mixing and distributing animal feed) • Encouraging growth through use of hired labor: public awareness to overcome stigma, tax breaks to stimulate hiring of workers

30. Non-farming rural employment • All non-farming income in Chongqing derives from wages, none from entrepreneurship • Development of non-farming businesses depends on grass-roots entrepreneurship: government has to identify options • Public awareness campaign: publicizing options and opportunities • Education, skill development, training: public good to be provided by government

31. Land Policy Note

32. Land policy challenges in Chongqing • Land issues are central to the economic and social transformation in China • Central Government land policy has been dynamic, but problems remain • CMG Master Plan with its ambitious targets for continued urban growth raises many challenges • CMG will need to address land reform issues with targeted policies across all land use types

33. Recommendations to promote coordinated urban and rural development • Develop land use planning tools to promote urban growth yet protect against extensive farmland conversion • Introduce reforms to develop efficient land markets including mortgaging land use rights • Allow mortgaging of arable land rights and foundation plots • Clearly define and document land use rights • Design uniform land contract and certificate

34. Recommendations continued (1) • Restructure urban and rural property rights registration by establishing a unified system • Remove prohibitions on collective construction land • Support Central Government initiatives in forestland tenure reform • Protect rural land use rights against land readjustments

35. Recommendations continued (2) • Improve land requisition and compensation practices • Assess requirements for institutional strengthening and training of personnel • Investigate alternative sources of sustainable local government finance

36. The Hukou System

37. Need for hukou reform • People without hukou are not entitled to free social services at the place of their residence • The hukou system is a barrier to labor mobility between rural and urban localities and between Chongqing and other provinces • The goal of hukou reform is to reduce income and welfare disparities between rural and urban residents: larger in Chongqing than in rest of China

38. Role of hukou in social policies • Urban-rural disparities in dibao – social assistance program: • Coverage • Access criteria • Benefits • Limited coverage of rural pension system, coverage rate low compared to rest of China

39. How to achieve the goal of hukou reform? • Equalize access to social assistance programs (rural and urban dibao) • Equalize access to public services (disease control, health care, maternal/child hygiene, emergency treatment) • Ensure equal employment opportunities to rural and urban residents • Eliminate restrictions imposed by registration considerations

40. Recommendations for hukou reform • Study reform experience of other provinces • Assess fiscal affordability of reform and prioritize reform actions • Delink eligibility for social services from registration and equalize rural-urban entitlements • Encourage development of flexible labor markets and employment opportunities to support hukou reforms

41. Skills development

42. Chongqing’s labor market characteristics • Dominated by labor-intensive heavy industries and services that require low-skilled labor • Labor surplus economy with half the rural population looking for employment outside Chongqing

43. Chongqing faces three challenges • Dealing with social consequences of return migration from coastal provinces hit by the global economic downturn • Facilitating the ongoing restructuring of employment • Balancing opportunities in the northeast and southeast wings with those in the one-hour economic sphere

44. Education and training will help Chongqing confront these issues • Encourage cost-effective use of resources and introduce accountability for results • Ensure equal access to schooling in rural and outlying areas: spatial distribution of schools, learning outcomes, and quality of education • Ensure quality and relevance of vocational and technical education • Implement school-based reforms to improve spending effectiveness and education quality

45. Summary • WB is accompanying an ongoing successful process (16% GDP growth/year) • WB is not leading – Government is – strong leadership • Importance of Chongqing is beyond its borders – if successful, to be replicated nationally • Rural urban integration, in whatever form, is of high importance to the Chinese government.

46. Thank you