China Economy

City migrants help boost rural incomes

Migrants from the countryside to mainland cities are helping push up rural incomes faster than urban ones, though rural spending still lags

PUBLISHED : Thursday, 31 January, 2013, 12:00am
UPDATED : Thursday, 31 January, 2013, 5:20am


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Mainland incomes rose faster in the countryside than in cities last year for the third year as migrant workers boosted their pay and the government strengthened the social safety net.

Rural per capita net income rose 10.7 per cent, against a 9.6 per cent increase for urban dwellers, partly because of the rise in migrant labourers and their wages, the National Bureau of Statistics said. Rural residents' income from benefits payments rose 21.9 per cent, almost double the urban pace, as the government boosted its budget for health-care handouts.

Rural spending power has been lifted by the wages earned by peasants working in cities, underscoring the broader benefits of the urbanisation drive championed by the incoming premier, Li Keqiang. Spreading gains in consumption would help sustain a growth rebound and reduce the economy's reliance on exports, which rose last year at less than half 2011's pace.

Zhang Zhiwei, chief China economist at Nomura Holdings in Hong Kong, said: "Rising rural incomes should help boost consumption and aid rebalancing. Growth will gear down as rising labour costs diminish investment incentives, but such consumption-led expansion will be more sustainable."

The trend may persist for a while as a declining working-age population helps push up migrant labourers' pay and the government keeps improving social safety net funds, including funds for healthcare in the countryside, Zhang said.

Rural per capita net income, which includes migrant workers' pay, rose more than that of urban residents in 2010 for the first time since 1997.

Retail sales in rural regions rose 14.5 per cent last year, beating the gain in urban areas, which increased 14.3 per cent, for the first time in three years. The growth rate for urban consumption in 2011 was 17.2 per cent, against a rise of 16.7 per cent for rural dwellers.

Rural spending, at 2.78 trillion yuan last year, was still less than one fifth of what urban households spent. Urban dwellers account for 53 per cent of China's population of 1.35 billion, according to the statistics bureau.

The central government's transfer-payment budget for rural health-care coverage in 2012 rose 36 per cent to 106.3 billion yuan, according to the Ministry of Finance.

Ren Xianfang, a Beijing-based analyst with the researcher HIS, said: "Income and wealth re-allocation favouring rural households should definitely help boost consumption, as lower-income households normally have a higher propensity to consume. This should help rebalancing."

The situation highlights the urgency of measures such as overhauling a household registration system that keeps 642 million rural dwellers from permanently joining the urban workforce, limiting their ability to contribute to the economy.

The State said in February last year that it would implement a policy of helping people register as urban residents in small and medium-sized cities and small townships and ensure equal benefits for countryside residents who have an urban registration. At the same time, the government will continue to "reasonably control" the population of bigger cities.

At the end of 2011, China had 230 million people who lived in cities without permanent residence, according to Chen Xiwen, China's top rural policy adviser. The Chinese government has a huge challenge in providing education, health care and jobs for these people, Chen said.

Strengthening consumption's role in boosting economic growth is one of the major tasks for this year, the government said after the annual central economic work conference in December.

A resurgence in optimism for China's economy has given stocks a boost. The Shanghai Composite Index has risen 20 per cent so far this year since its 2012 low on December 3.

While economic growth for the full year was the weakest since 1999, expansion rebounded in the fourth quarter to 7.9 per cent year-on-year, after a seven-quarter slowdown.

Even with the gains, per capita rural net income last year was 7,917 yuan, less than a third of per capita urban disposable income of 24,565 yuan, statistics bureau data showed. Ma Jiantang, head of the statistics bureau, said earlier this month that China must on the one hand, "make the cake bigger, and on the other hand, we must do a better job in sharing the cake."

In Japan, retail sales rose 0.1 per cent last month over November, less than economists forecast, a report showed yesterday. South Korea's industrial production unexpectedly expanded in December from November as domestic demand offset weakness in exports.