SHANGHAI, China – The long-standing, politically sensitive wealth gap between China's city dwellers and its farmers is widening as the economy slows, foiling pledges by the country's communist leaders to help the countryside catch up.
Factories have closed, forcing millions of migrant workers to return to their rural families who depend on their incomes. The reduced purchasing power in the countryside could also hinder efforts to counter a recession by boosting domestic consumer spending.
Agriculture Ministry statistics show the gap between average urban and rural incomes expanded to 11,100 yuan (about $1,600 U.S.) in 2008, with the ratio between the richer city residents to those in the countryside rising to 3.36 to 1, the state-run newspaper reported last week. The ratio was 3.33 to 1 in 2007.
China's stunning economic boom was fuelled largely by its huge pool of inexpensive migrant labour. Though factory wages were rising before plunging demand caused exports to slump last fall, villages still lag far behind the cities.
That disparity is what brings farmers like Gan Qiang, a 36-year-old courier from a village outside Beijing, to a city like Shanghai.
"It's much tougher making a living in my hometown. You can't just rely on planting crops," Gan said as he stood outside a subway station on a busy downtown shopping street.
"Here at least I don't have to worry about the damned weather. I just wait at the subway station and fetch things for people," he said.
With a population of 1.3 billion, China has far more people than jobs to be filled. But legions of farmers like Gan have found work in city factories and construction sites, or as peddlers, delivery men, recyclers and domestic helpers.
Incomes in Shanghai and some other big cities are about a third higher than the average annual urban income, which was 15,800 yuan in 2008, Chen Xiwen, a top rural planning official, reported at a conference last week in Beijing. The average rural income was 4,700 yuan.
In developing countries like China, such inequalities are not uncommon. But China's urban incomes have increased much more quickly, with average annual income jumping 74 per cent since 2003, while rural incomes rose only 31 per cent. And many of the migrant workers now heading back to their hometowns for the Lunar New Year holiday that begins Jan. 25 will have no jobs to return to.
The country's economic woes have even cast a dim light over Lunar New Year's celebrations – the biggest festival of the year.
In China, where many businesses count on the equivalent of a Christmas shopping boom for a big share of annual sales, the blow will hurt.
"We would estimate spending would be off 20 to 30 per cent this year, which is rather critical for quite a large number of retailers and certainly restaurants," said Sam Mulligan, director of market research firm Data-Driven Marketing Asia, which surveyed 4,500 consumers in five major cities in December. "All of these areas are going to be hit hard.''
Mulligan said 35 per cent of all Chinese entertainment spending and 40 per cent of sales of premium beer and liquor takes place over the week-long Lunar New Year holiday.
The huge divide in Chinese living standards is apparent in the armies of humbly dressed men and women hauling carts piled with boxes, discarded appliances and other scrap for recycling through city streets.
It is also seen in the beggars prowling city subway lines and street corners, and in the rundown ghettos and shanty towns in and around city suburbs.
Layoffs and sudden factory closures have provoked protests in some regions, accentuating worries over the threat to social stability and prompting government calls for companies to avoid job cuts.
So far, anger over layoffs seems aimed mainly at employers, but there are risks of wider problems.
"We are concerned about what we don't know in China and the migrants are something that we don't know," McCormack said.
