CHINA'S SECOND STAGE RURAL REFORMS -- DEVELOPING RURAL INDUSTRIES IN THE SHANDONG COUNTRYSIDE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP93T01142R000100240031-3
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 7
• Document Creation Date: December 23, 2016
• Document Release Date: December 1, 2011
• Sequence Number: 31
• Publication Date: January 17, 1985
• Content Type: CABLE

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PAGE 001
TOR: 1707082 JAN 85
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TO RUEHC/SECSTATE WASHDC
INFO RUEHDC/USDOC WASHDC
RUEHIN/AIT TAIPEI
8155
RUMTBK/AMEMBASSY
BANGKOK
3189
RUEHBJ/AMEMBASSY
BEIJING
2715
RUFHDR/AMEMBASSY
DAR ES
SALAAM 0108
RUEHJA/AMEMBASSY
JAKARTA 7683
RUEHKL/AMEMBASSY
KUALA LUMPUR 7271
RUEHMO/AMEMBASSY
MOSCOW
3095
RUFHFR/AMEMBASSY
PARIS 4151
RUMJRV/AMEMBASSY
RANGOON 3278
RUEHUL/AMEMBASSY
SEOUL 7462
RUEHKO/AMEMBASSY
TOKYO 1656
RUHOHQA/CINCPAC
HONOLULU HI//POLAD
RUFHNA/USMISSION
USNATO 0530
RUEHCR/AMCONSUL
GUANGZHOU 4496
RUMJSA/AMCONSUL
SHANGHAI 3550
BT
UTS9355
RR RUEH
BEIJING PASS SHENYANG
PARIS PASS USOECD
DEPT PASS ELECTRONICALLY TO DRAY/USTR AND FAS/USDA
E.O. 12065:OADR
TAGS: EAGR, EIND, ECON, CH ~ .
SUBJECT: CHINA'S SECOND STAGE RURAL REFORMS -- DEVELOPING
RURAL INDUSTRIES IN THE SHANDONG COUNTRYSIDE
REF: A) HONG KONG 289
1. CONFIDENTIAL ENTIRE TEXT.
2. SUMMARY AND INTRODUCTION: BY ALL ACCOUNTS, CHINA'S
RURAL REFORM PROGRAM HAS BEEN HIGHLY SUCCESSFUL OVER THE
PAST FIVE YEARS, RAISING RURAL PRODUCTIVITY AND PRODUC-
TION SIGNIFICANTLY THROUGH A ONE-TIME STRUCTURAL CHANGE
-- DISMANTLING THE COMMUNE SYSTEM AND INTRODUCING HOUSE-
HOLD RESPONSIBILITY SYSTEMS. NONETHELESS, SOME WESTERN
ECONOMISTS SERIOUSLY DOUBT CHINA'S ABILITY TO MAINTAIN
THE MOMENTUM OF THE CURRENT REFORM EFFORT, CLAIMING THAT
THE ONE-TIME STRUCTURAL ADJUSTMENT WILL ONLY BOOST PRO-
DUCTION GROWTH TEMPORARILY AND THAT WITHOUT CONTINUING
CENTRAL INVESTMENT AT THE GRASS ROOTS LEVEL, PRODUCTIVITY
IN THE LONG RUN WILL REACH A PLATEAU. BEIJING, HOWEVER,
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HAS MOVED BEYOND THE SIMPLE STRUCTURAL ADJUSTMENTS THAT
WERE A PART OF THE PROGRAM TO DISMANTLE THE COMMUNES AND
HAS BEGUN A SECOND STAGE IN ITS RURAL REFORM PACKAGE,
PROMOTING RURAL INDUSTRIALIZATION.
3. TO INVESTIGATE THIS NEW DEVELOPMENT, CONGEN OFFICERS
RECENTLY VISITED SHANDONG PROVINCE -- CHINA'S MOST IM-
PORTANT AGRICULTURAL PROVINCE IN TERMS OF OUTPUT VALUE
AND SECOND ONLY TO PROSPEROUS JIANGSU PROVINCE IN THE
DEVELOPMENT OF ITS RURAL INDUSTRIES. FROM OUR VISIT, IT
WAS CLEAR THAT THE DEVELOPMENT OF RURAL INDUSTRIES WILL
HELP INVIGORATE AND SUSTAIN ECONOMIC GROWTH IN THE
CHINESE COUNTRYSIDE. ALTHOUGH RURAL INDUSTRIES HAVE
LOWER CAPITAL-LABOR RATIOS, LESS SOPHISTICATED LEVELS OF
TECHNOLOGY AND LOWER RATES OF CAPITAL UTILIZATION THAN
THEIR URBAN COUNTERPARTS, SHANDONG'S RURAL ENTERPRISES
WERE PROSPEROUS AND BOOMING. THIS IN LARGE MEASURE IS
BECAUSE RURAL INDUSTRIES ARE MORE RESPONSIVE TO THE
MARKET THAN URBAN INDUSTRIES ANO BECAUSE RURAL WORKERS
ARE BETTER PAID BECAUSE RURAL INDUSTRIES PAY LESS TAXES.
GROWING RURAL INCOMES FROM THESE ENTERPRISES, BY RAISING
THE PURCHASING POWER OF CHINA'S 800 MILLION PEOPLE, WILL
STIMULATE CONSUMPTION DEMAND AND INVESTMENT IN MORE AND
BETTER EQUIPMENT IN RURAL INDUSTRIES. THE GROWTH IN
JOB OPPORTUNITIES AND RISING RURAL WAGE LEVELS SHOULD
IN TURN, ENCOURAGE CHINA'S PEASANTS TO REMAIN IN THE
COUNTRYSIDE, ALLEVIATING POPULATION PRESSURES ON THE
CITIES. END SUMMARY AND INTRODUCTION.
4. CHINA'S RURAL REFORM PROGRAM IS NOW MOVING INTO A
SECOND STAGE. IN THE FIRST STAGE BEGINNING IN 1979,
BEIJING INTRODUCED THE HOUSEHOLD RESPONSIBILITY SYSTEM
-- REPLACING COLLECTIVE FORMS OF AGRICULTURAL PRODUCTION
ASSOCIATED WITH THE COMMUNE SYSTEM -- AND RAISED THE
PROCUREMENT PRICES OF SEVERAL KEY COMMODITIES. AGRICUL-
TURAL OUTPUT HAS INCREASED SO MUCH AS A RESULT THAT THE
NATIONAL BUDGET HAS BEEN SEVERELY STRAINED BY GRAIN AND
PRICE SUBSIDIES, AND CHINA IS NOW BEGINNING TO EXPORT
LARGE pUANTITIES OF RICE, CORN, AND COTTON. AT THE SAME
TIME, CENTRAL INVESTMENT IN RURAL INFRASTRUCTURE HAS
DECLINED, BUT SO FAR BEIJING HAS BEEN CONTENT TO UTILIZE
THE EXCESS PRODUCTION CAPACITY BUILT INTO THE RURAL
SYSTEM DURING THE CULTURAL REVOLUTION PERIOD FROM 1966
TO 1976 WHILE ENCOURAGING PRIVATE INVESTMENT THROUGH
LONGER CONTRACTS AND OTHER INDIRECT INCENTIVES.
BEIJING PASS SHENYANG
PARIS PASS USOECD
DEPT PASS ELECTRONICALLY TO DRAY/USTR AND FAS/USDA
E.O. 12065:OADR
TAGS: EAGR, EIND, ECON, CH
SUBJECT: CHINA'S SECOND STAGE RURAL REFORMS -- DEVELOPING
5. BEIJING'S REFORMERS HAVE STRESSED THAT THE MAJOR
OBSTACLE TO FURTHER DEVELOPMENT IS CHINA'S MASSIVE RURAL
POPULATION, ABOUT 70 PERCENT OF WHICH IS SURPLUS TO THE
NEEDS OF AGRICULTURAL PRODUCTION -- EVEN IN A SYSTEM
WHICH RELIES HEAVILY ON MANUAL LABOR. IN ORDER TO ABSORB
THIS SURPLUS LABOR, BEIJING HAS BEGUN ENCOURAGING THE
DEVELOPMENT OF RURAL INDUSTRIES IN A SECOND STAGE REFORM
EFFORT. THIS DEVELOPMENT SHOULD HAVE A MORE LASTING
IMPACT ON THE RURAL ECONOMY, SPURRING NEW ECONOMIC GROWTH
AND ALLEVIATING THE TENDENCY TOWARDS URBAN MIGRATION.
;ONFIDENTIAL
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6. ACCORDING TO THE SEPTEMBER 9 PEOPLE'S DAILY, RURAL
INDUSTRIES IN CHINA ARE ALREADY BEGINNING TO HAVE A
SIGNIFICANT IMPACT ON THE ECONOMY. IN 1983, THE GROSS
VALUE OF INDUSTRIAL OUTPUT OF RURAL FACTORIES REACHED
79 BILLION YUAN (ROUGHLY 20 BILLION U.S. DOLLARS) --
EQUIVALENT TO 12 PERCENT OF CHINA'S INDUSTRIAL OUTPUT
ZN THE URBAN SECTOR. RURAL INDUSTRIES IN 1983 ALREADY
EMPLOYED 30 MILLION PEOPLE -- EQUIVALENT TO ONE-THIRD
OF CHINA'S URBAN LABOR FORCE. MORE IMPORTANTLY, IN LINE
WITH CHINA'S SHIFT TO A SECOND STAGE RURAL REFORM STRATE-
GY, RURAL INDUSTRIAL OUTPUT GREW 17 PERCENT MORE IN 1983
THAN IN 1982 AND IS EXPECTED TO INCREASE AT AN EVEN
GREATER RATE FOR 1984.
7. SHANDONG IS A GOOD CASE STUDY OF THE POTENTIAL FOR
THE SUCCESSFUL IMPLEMENTATION OF THE SECOND STAGE RURAL
REFORM PROGRAM. SHANDONG IS CHINA'S MOST IMPORTANT
AGRICULTURAL PROVINCE, ACCOUNTING FOR 9 PERCENT OF THE
NATION'S TOTAL OUTPUT AND EXCEEDING 14 BILLION U.S.
DOLLARS IN OUTPUT VALUE IN 1983. MOREOVER, ITS RURAL
INDUSTRIES AND SIDELINE PRODUCTION TOTALLED MORE THAN
2.2 BILLION U.S. DOLLARS IN OUTPUT VALUE IN 1983, SECOND
ONLY TO JIANGSU PROVINCE. IN CERTAIN REGIONS IN SHAN-
DONG, THE DEVELOPMENT OF RURAL INDUSTRIES HAS BEEN
MARKEDLY AHEAD OF DEVELOPMENTS THROUGHOUT THE COUNTRY.
IN 1978 IN YANTAI PREFECTURE, FOR EXAMPLE, 35 PERCENT
OF TOTAL AGRICULTURAL OUTPUT VALUE WAS IN RURAL INDUS-
TRIES AND SIDELINES. THIS IS A SIGNIFICANT FIGURE EVEN
BY CURRENT STANDARDS WHICH PUT THE NATIONAL AVERAGE AT
ABOUT 17.4 PERCENT IN 1983. HOWEVER, BY 1983, ROUGHLY
TWO-THIRDS OF ALL OF YANTAI'S AGRICULTURAL OUTPUT VALUE
WAS IN RURAL INDUSTRIES AND SIDELINES. EVERY RURAL
VILLAGE IN THE PREFECTURE HAD AN AVERAGE OF FOURTEEN
RURAL FACTORIES, AND 37 PERCENT OF THE RURAL HOUSEHOLDS
ALREADY SPECIALIZE IN SOME SIDELINE PRODUCTION.
8. ON THE SURFACE, URBAN FACTORIES FAR OUTSTRIP RURAL
INDUSTRIES AND WORKSHOPS. THE AMOUNT OF MACHINERY AVAIL-
ABLE PER WORKER (I.E., CAPITAL-LABOR RATIO) IS GENERALLY
MUCH LESS IN RURAL WORKSHOPS. A SHOP IN MOPING COUNTY'S
WULITOU VILLAGE, WHICH WE VISITED, MAKING GASOLINE TANKS
FOR A LOCAL TRACTOR FACTORY HAD ABOUT 30 WORKERS BUT
ONLY FOUR SIMPLE HYDRAULIC PRESSES, A FEW HAND-HELD
WELDING IRONS, A SMALL AIR COMPRESSOR, AND SEVERAL METAL
BASINS FILLED WITH WATER -- THE LAST USED TO TEST FOR
LEAKS BY HOLDING THE FINISHED TANKS UNDER WATER AND
PUMPING AIR INTO THE TANKS. IN CONTRAST, YANTAI'S
BICYCLE FACTORY HAD A NEW 500 THOUSAND U.S. DOLLAR
ELECTRO-PLATING FACILITY WHICH ONLY NEEDED A HANDFUL
OF WORKERS TO OPERATE.
BEIJING PASS SHENYANG
PARIS PASS USOECD
DEPT PASS ELECTRONICALLY TO DRAY/USTR AND FAS/USDA
E.O. 12065:OADR
TAGS: EAGR, EIND, ECON, CH
SUBJECT: CHINA'S SECOND STAGE RURAL REFORMS -- DEVELOPING
9. THE TECHNOLOGY OF RURAL INDUSTRIES ALSO LAGS FAR
BEHIND MOST URBAN FACTORIES. THE RURAL WORKSHOPS WE SAW
MAKING APPAREL AND HANDBAGS IN ANGIU COUNTY'S SHIJIA-
ZHUANG VILLAGE AND CHANGQING COUNTY'S HOUSAN VILLAGE
CONFIDENTIAL
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STILL USED FOOT-POWERED SEWING MACHINES. AND ONE FACTORY
IN WULITOU VILLAGE WHICH MADE "SOLAR HEATERS" PUT TO-
GETHER A SERIES OF COPPER TUBES WITH HAND-HELD WELDERS
AND A PIPE CUTTER. THE MOST SOPHISTICATED TECHNOLOGY
AT THE VILLAGE LEVEL THAT WE SAW WAS A LARGE PLASTIC
EXTRUDER WHICH FORMED PLASTIC BAGS. IN CONTRAST, MOST
OF THE URBAN FACTORIES WE VISITED IN SHANDONG HAD MUCH
MORE UP-TO-DATE TECHNOLOGY. FOR EXAMPLE, THE ANALYTICAL
LAB OF JINAN'S DIESEL ENGINE FACTORY HAD U.S. AND WEST
GERMAN ELECTRON MICROSCOPES WHICH COULD DIRECTLY ANALYZE
THE STRUCTURE OF METALS WITHOUT PRIOR SAMPLE PREPARATION
-- TECHNOLOGY WHICH WAS RARE IN THE MID-1960'5, EVEN IN
THE UNITED STATES.
10. MOREOVER, THE RATE OF CAPITAL UTILIZATION IN RURAL
INDUSTRIES IS GENERALLY LOW. FOR EXAMPLE, NEITHER THE
HYDRAULIC PRESSES NOR THE LARGE PLASTIC EXTRUDER WERE IN
OPERATION DURING OUR VISIT, AND -- ACCORDING TO VILLAGE
CADRES -- THE PLASTIC EXTRUDER REMAINED IDLE MOST OF THE
TIME BECAUSE ITS PRODUCTION CAPACITY FAR OUTSTRIPPED
LOCAL DEMAND FOR PLASTIC BAGS. WHILE LOW UTILIZATION
RATES OF CAPITAL ASSETS ARE OFTEN ALSO A PROBLEM IN
CHINA'S URBAN FACTORIES -- ESPECIALLY IN THE MACHINE
BUILDING INDUSTRY -- OUR OBSERVATIONS WERE THAT THIS
PROBLEM IS MUCH WORSE IN RURAL WORKSHOPS AND FACTORIES.
11. WE ALSO NOTED DURING OUR SHANDONG JOURNEY, THAT IN?
THE DESIGN OF PRODUCTION LINES, URBAN FACTORIES -- AT
THE MINIMUM -- CONSIDER FACTORS SUCH AS PRODUCTION FLOW
AND SPACE UTILIZATION. ON THE OTHER HAND, MOST RURAL
INDUSTRIES HAVE NO DISCERNIBLE PRODUCTION LINE DESIGN,
AND THE LOCATION OF PEOPLE AND TOOLS IS OFTEN DETERMINED
BY SOCIAL RATHER THAN TECHNICAL RELATIONSHIPS.
12. IN SPITE OF THESE TECHNICAL DRAWBACKS, RURAL INDUS-
TRIES IN SHANDONG WERE FLOURISHING, AND THEIR WORKERS
WERE OFTEN EARNING SUBSTANTIALLY MORE THAN THEIR URBAN
COUNTERPARTS. MANY OF THE WORKERS IN THE 5,000 WORKER
BOSHAN N0. 1 CERAMIC FACTORY IN ZIBO WERE MAKING ONLY
30 YUAN (12 U.S. DOLLARS) PER MONTH. WAGES IN VARIOUS
RURAL FACTORIES VISITED BY CONGEN OFFICERS RANGED FROM
50 YUAN (20 U.S. DOLLARS) TO 200 YUAN (80 U.S. DOLLARS)
PER MONTH. IT WAS NOT UNUSUAL TO FIND MANY YOUNG TEEN-
AGE WOMEN IN VILLAGE LEVEL ENTERPRISES DRAWING 100 YUAN
PER MONTH AND ADDING SIGNIFICANTLY TO THE INCOMES OF
THEIR FAMILIES, OFTE' MATCHING OR SURPASSING FAMILY
INCOMES EARNED THROUGH AGRICULTURAL PRODUCTION.
13. THERE ARE TWO IMPORTANT REASONS FOR THIS SEEMING
CONTRADICTION -- TAXES AND THE RESPONSIVENESS OF RURAL
INDUSTRIES TO THE MARKET. IN ADDITION TO THE REGULAR
55 PERCENT INCOME TAX ASSESSED ALL URBAN ENTERPRISES,
MOST URBAN FACTORIES THAT WE VISITED ALSO PAID A SO-
CALLED "ADJUSTMENT TAX" WHICH RANGED UPWARDS TO 35
PERCENT OF AN ENTERPRISE'S NET PROFITS. AS A RESULT,
RETAINED EARNINGS SOMETIMES AMOUNTED TO ONLY ABOUT
10 PERCENT OF NET PROFITS, AND THIS WAS ALLOCATED FOR
THE MOST PART FOR WORKER WELFARE FUNDS AND PLANT EXPAN-
BEIJING PASS SHENYANG
PARIS PASS USOECD
DEPT PASS ELECTRONICALLY TO DRAY/USTR AND FAS/USDA
E.O. 12065:OADR
TAGS: EAGR, EIND, ECON, CH
iONFiDENTIAL
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SUBJECT: CHINA'S SECOND STAGE RURAL REFORMS -- DEVELOPING
SION. IN CONTRAST, RURAL ENTERPRISES RETAINED AND
DIVIDED UP MOST OF THEIR PROFITS AMONG THE FACTORY
MANAGERS AND WORKERS, MAINTAINING ONLY ABOUT 25 PER-
CENT OF THE PROFITS FOR THE COLLECTIVE. THUS, THE
PERCENTAGE OF THE RETAINED PROFITS SHARED BY RURAL
WORKERS COULD BE SEVEN TIMES OR MORE THAT RECEIVED BY
URBAN WORKERS.
14. IN TERMS OF RESPONSIVENESS TO THE MARKET, RURAL
ENTERPRISES CAN ADJUST "AS QUICKLY AS GETTING ON A HORSEE
ON THE PRODUCTION SIDE, EQUIPMENT SUCH AS THE HYDRAULIC
PRESSES SEEN AT WULITOU VILLAGE CAN BE USED TO MAKE A
WIDE VARIETY OF PRODUCTS BY CHANGING THE DIE THAT GOES
INTO THE PRESS. AND BECAUSE MOST OF THE MANUFACTURING
METHODS ARE RELATIVELY SIMPLE, THE LABOR FORCE CAN
EASILY ADJUST TO CHANGES IN PRODUCT LINES. THIS FLEXI-
BILITY ALLOWS RURAL ENTERPRISES TO ADAPT QUICKLY TO
CHANGING PRODUCT DEMAND. FOR EXAMPLE, TWO GOODS WE
SAW BEING PRODUCED IN SHANDONG -- TRACTOR GASOLINE TANKS
AND "SOLAR HEATING UNITS" -- WERE OBVIOUSLY IN HIGH
DEMAND AT THAT TIME. IF THEIR CUSTOMERS' NEEDS CHANGED,
HOWEVER, THESE WORKSHOPS COULD EASILY ADAPT TO MEET THE
NEW DEMAND.
LONG-TERM IMPACT OF RURAL INDUSTRIES ON CHINA'S DEVELOP-
MENT
15. RURAL ENTERPRISES' RESPONSIVENESS TO MARKET SIGNALS
AND THE ABILITY OF WORKERS TO SHARE IN THE PROFITS OF
THE ENTERPRISE MORE THAN OFFSET THE TECHNICAL DISADVAN-
TAGES OF RURAL INDUSTRIES VISA-VIS URBAN FACTORIES.
MORE IMPORTANTLY, HOWEVER, THE ESTABLISHMENT AND DEVELOP-
MENT OF RURAL INDUSTRIES -- UNLIKE THE ONE-TIME STRUCTURAL
CHANGE BROUGHT ABOUT BY THE DISMANTLING OF THE COMMUNE
SYSTEM AND THE INTRODUCTION OF HOUSEHOLD RESPONSIBILITY
SYSTEMS -- HAVE THE POTENTIAL FOR CONTINUING TO STIMULATE
ECONOMIC GROWTH FOR THE FORESEEABLE FUTURE.
16. THE GROWTH OF RURAL INDUSTRIES IN THE FUTURE SEEMS
ASSURED IN CHINA. THIS IS BECAUSE LABOR INTENSIVE RURAL
ENTERPRISES MAKE GOOD USE OF TYPICALLY UNDEREMPLOYED
LABORERS IN RURAL COMMUNITIES, AND CHINA HAR A SURPLUS
OF SUCH WORKERS. THE NOVEMBER 1 TA KUNG PAO (DAGONGBAD)
REPORTED THAT ONLY 100 MILLION OF CHINA'S 300 MILLION
RURAL WORKERS ARE NEEDED TO FARM ITS 133 MILLION HECTARES
OF LAND. MOREOVER, THE ACTIVITIES OF MOST RURAL ENTER-
PRISES AT THE VILLAGE LEVEL CAN BE MADE TO COINCIDE WITH
THE AGRICULTURAL SECTOR'S SEASONAL LABOR DEMANDS, GEARING
UP IN THE SLACK SEASON BUT REDUCING PRODUCTION AT OTHER
TIMES.
17. IN ADDITION, THE GARAGE-SCALE, LABOR INTENSIVE
INDUSTRIES DEVELOPING IN CHINA'S RURAL AREAS FIT PER-
FECTLY WITH THE RESOURCE ALLOCATION (LABOR RICH BUT
CAPITAL POOR) OF CHINA'S RURAL AREAS. THE DEVELOPMENT
OF THESE INDUSTRIES -- BY INCREASING THE PURCHASING
POWER OF RURAL DWELLERS -- WILL INCREASE THE DEMAND
FOR THE AMOUNT AND VARIETY OF PRODUCTS, STIMULATING
CHINA'S 800 MILLION PEOPLE RURAL MARKET. THIS MARKET
IS YET UNTAPPED AS WITNESSED BY CHINA'S GROWING RURAL
SAVINGS PHENOMENA. ACCORDING TO THE SEPTEMBER 11 WEN
WEI PO (WENHUIBAO), RURAL SAVINGS NOW TOTAL OVER 15
BILLION U.S. DOLLARS.
CONE i DENT I AL
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85 6199097 SCR PAGE 006 NC 6199097
TOR: 1707082 JAN 85
E.O. 12065:OADR
TAGS: EAGR, EIND, ECON, CH
SUBJECT: CHINA'S SECOND STAGE RURAL REFORMS -- DEVELOPING
18. CHINA'S RURAL ENTREPRENEURS ARE ALREADY MOVING
FORWARD TO DEVELOP AND EXTEND THIS MARKET. FOR EXAMPLE,
THE DEMAND FOR TRANSPORTATION VEHICLES -- EVEN SMALL 12
HORSEPOWER TRACTORS -- HAS GROWN TREMENDOUSLY OVER THE
PAST TWO YEARS AS PEASANT ENTREPRENEURS HAVE SOUGHT TO
EXTEND THEIR MARKETS TO URBAN CENTERS AND THE NEWLY
DEVELOPING RURAL MARKET TOWNS. AS PROFITS GROW, RURAL
ENTERPRISES WILL ALSO SINK INVESTMENTS IN MORE AND BETTER
EQUIPMENT TO EXPAND THE PRODUCTIVE CAPACITY OF RURAL
ENTERPRISES -- A SINE QUA NON FOR SUSTAINED ECONOMIC
GROWTH. WE SAW A GREAT VARIETY OF NEW EQUIPMENT IN
RURAL ENTERPRISES, SOME ALREADY ON PAR WITH THE EQUIPMENT
BEING USED BY SMALL FACTORIES IN URBAN AREAS.
19. THERE IS YET ONE FINAL BUT IMPORTANT CONSEQUENCE OF
THE DEVELOPMENT OF RURAL INDUSTRIES -- THEIR EFFECT ON
POPULATION DISTRIBUTION. INDEED, ONE OF CHINA'S MOST
PRESSING POPULATION PROBLEMS IS OVERCROWDING IN THE
CITIES. ACCORDING TO CHINA'S 1982 CENSUS, CHINA'S POPU-
LATION DENSITY WAS 105 PERSONS PER SQUARE KILOMETER
(VERSUS ABOUT 20 PERSONS PER SO/KM IN THE UNITED STATES).
THE POPULATION DENSITY OF CHINA'S THREE LARGEST CITIES,
HOWEVER, WAS MUCH HIGHER -- 1913 PERSONS PER SQ/KM IN
SHANGHAI, 687 IN TIANJIN, AND 549 IN BEIJING. WHILE
POPULATION DENSITY IN CHINA'S CITIES HAS CONTINUED TO
RISE OVER THE PAST 35 YEARS, THE RATE OF INCREASE WAS
LOWER FOR THE CITIES THAN THAT OF THE NATION AS A WHOLE.
FROM 1964 TO 1982, FOR EXAMPLE, CHINA'S OVERALL POPULA-
TION DENSITY ROSE BY AN AVERAGE OF 2.1 PERCENT PER YEAR,
WHEREAS TIANJIN'S POPULATION DENSITY WENT UP 1.2 PER-
CENT PER ANNUM, BEIJING'S 1.1 PERCENT AND SHANGHAI'S
O.5 PERCENT.
20. CHINA HAS BEEN ABLE TO SUSTAIN LOW POPULATION DEN-
SITY GROWTH RATES FOR ITS URBAN POPULATIONS BY CLOSELY
MONITORING AND RESTRICTING THE MIGRATION OF PEOPLE FROM
THE VILLAGES TO THE CITIES. THUS, RURAL TO URBAN
MIGRATION -- COMMON AND SUBSTANTIAL IN ALMOST ALL OTHER
DEVELOPING COUNTRIES -- HAS BEEN MINIMAL IN CHINA. CHINA
HAS ALSO BENEFITED FROM THE FACT THAT NATURAL POPULATION
GROWTH RATES ARE LOWER IN URBAN AREAS THAN RURAL VILLAGES
BECAUSE OF THE SCARCITY OF LIVING SPACE IN URBAN LIVING,
MORE ABUNDANT JOB OPPORTUNITIES AND THE DIFFICULTY OF
FINDING PEOPLE TO TAKE CARE OF CHILDREN WHEN BOTH PARENTS
WORK.
21. RESTRICTIONS ON POPULATION MOVEMENTS IN CHINA,
HOWEVER, ARE ALREADY BEGINNING TO EASE WITH THE INTRO-
DUCTION OF BROAD SCALE ECONOMIC REFORMS AND RAPID ECONOMIC
GROWTH (REFTEL). THIS WILL TEND TO INCREASE MIGRATION
TO THE CITIES, THEREBY INC-EASING THE POPULATION DENSITY
OF CHINA'S ALREADY CROWDED CITIES. HOWEVER, THE DEVELOP-
MENT OF RURAL INDUSTRIES -- BY INCREASING RURAL INCOME
LEVELS, EXPANDING JOB OPPORTUNITIES IN THE COUNTRYSIDE,
AND PROVIDING A BETTER STANDARD OF LIVING -- MAY DIM THE
GLITTER OF THE LURE OF CHINA'S CITIES. INDEED, GIVEN
THE SUBSTANTIAL AND GROWING INCOME DIFFERENCES BETWEEN
URBAN AND RURAL FACTORY WORKERS, MIGRATION FROM RURAL
TO URBAN AREAS COULD SLOW AND MAY -- IN SOME CASES --
CONFIDENTIAL
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