Mobility and Agency: Private Sector Development in Rural Central China

Abstract

Economic inequality is a continuing challenge for China. According to a recent World Bank report, China’s Gini Coefficient rose to .47 in 2009, from .28 thirty years ago, indicating rising income inequalities. The rising rural–urban income gap is particularly challenging, as incomes of urban residents are now 3.3 times greater than rural incomes. In response to this, the goal of “inclusive growth” (growth which benefits all economic strata and regions) has become central to the design of China’s 12th Five-Year Plan (FYP), in line with the commitment of President Hu Jintao and Premier Wen Jiabao to achieving a “harmonious society” in China. To counter rising income inequality between urban and rural China and between coastal regions and the interior, Beijing has poured more than one trillion yuan into infrastructure and social welfare improvements, and has distributed these funds as part of its Western Development Program (since 1999), the Northeast Rejuvenation Initiative (after 2003) and the Central China Developmental Program (after 2005), along with a host of other developmental aid programs. While such government-led efforts may provide some benefit to remote regions, the state’s ability to support the generation of private income is of paramount importance. Since 1998, when China privatized the majority of local state-owned enterprises (SOEs) (difang guoying qiye 地方国营企业), the private sector has played an ever more important role in employment, innovation and income generation. Yet, while a number of national policies and laws have improved the business environment for private enterprise over the past 30 years, there continue to be