Economic crisis threatens China's rural strategy, says OECD

China should speed up investment in rural services and infrastructure and create jobs in non-agricultural sectors for returning migrants, according to a new OECD report. This will help offset the fast-rising impact of the economic slowdown on the rural economy.

OECD Rural Policy Review: China says that the country's rural development strategy is on the right track and the impact on rural areas of broader economic reforms positive. But the recent increase in return migration and subsequent fall in remittances could threaten the important progress made in raising rural living standards.

"China has shown a remarkable ability to react quickly to changing economic circumstances," said OECD Secretary-General Angel Gurría. "But policymakers should be prepared to take further action to drive consumer demand and consumption. The current recession has put into harsh relief the low level of the social safety nets and the livelihood of migrant workers. Programmes to address these issues need to be pursued actively. In the long-term, China must look beyond agriculture for a sustainable and diversified rural economy."

Creating jobs in non-agricultural sectors is vital, as it will be difficult for agriculture to reabsorb returning workers without hurting productivity and so farmers' incomes. Emerging sectors such as tourism and renewable energy production should be supported. Improving the skills of the rural workforce and giving farmers easier access to credit would also encourage entrepreneurship.

Laws on farmland rights need to be implemented and recently improved policies on expropriation embodied into law. Compensation for expropriated land should be increased.

Improving public services in the countryside would help strengthen social cohesion and bridge the widening gap in living standards with urban areas and across different rural regions. Around 300 million people of China's 1.3 billion people lack access to safe drinking water. The gaps in educational and health standards remain large, both between regions and between rural and urban areas.

China should accelerate investment in basic services, such as water supply and sanitation, and in education and social security, including medical cover and pensions. This would help free up precautionary savings and help boost domestic consumption.

A more integrated approach to rural development is also needed, with a more formal co-ordination role at the central level, according to the report. Local authorities with falling tax revenues and increasing spending responsibilities should get more financial support from the central government.

Strengthening the judicial system would help make rural governance more effective. Judicial independence and the authority of the courts should be strengthened. Support for enhanced citizen participation at the local level could serve to promote a more open and inclusive policy making.

For more information, visit oecd.org/china