When Wang Zhenyu moved out of his small village in central Henan province to the coastal city of Dalian at 18, he was astonished. “It was like a culture shock for me, even though it was just a big city in my country, not a foreign land.” A few years later when he was enrolled in Peking University as a graduate student, he found much fewer students in the country’s top university coming from a similar background to his.
Growing up in a small village of 2,000 farmers, many of Wang’s childhood friends dropped out of school after finishing their nine years of compulsory education. Now with a decent academic job, Wang begins to experience “reverse culture shock” every time he goes back to his village for the annual lunar new year.
“When I get together with my childhood friends in my village, the number of attendees reduces every year. Some went out to be migrant workers in big cities then never came back; others have gotten used to the life as villagers. It’s the poverty that is dividing us. It’s a vicious circle.”
As China grows wealthier as a nation, its gap between rich and poor, urban and rural also increases. Although the country’s official Gini coefficient, a measurement of income inequality, has improved slightly in recent years, experts have also questioned its accuracy. Last May, Premier Li Keqiang revealed that 600 million citizens only earn about 1,000 yuan (£112) a month, indicating the extent of the problem. Many worry the Covid pandemic may have reversed the trend again.
The story of Wang’s home village is common in China. After all, 40% to two-thirds of China’s 1.4 billion population are still living in rural areas. Wang’s own path from poverty to the ranks of the educated middle class is “very rare”, remarked Scott Rozelle, a development economist at Stanford University’s Freeman Spogli Institute for International Studies.
“How much Wang’s childhood friends and their fellow villagers can contribute to the country’s changing labour market matters for the future of the world’s second-largest economy. The reality, however, does not look optimistic,” added Rozelle, who has spent the last 30 years researching China’s labour force and its rural-urban divide.
President Xi Jinping has vowed to keep the Communist party in power as it celebrates its centenary this week. Some analysts say the ever-increasing rural-urban divide, and the division between rich and poor, pose the biggest uncertainty to China’s society, as well as a threat to the longevity of the 92 million-strong political organisation.
“Although the party does not face any electoral pressure, anger over inequalities could undermine its authority and trigger resentment if it fails to take actions that alleviate the people’s pain,” said Yu Jie, senior research fellow on China at the London-based thinktank Chatham House. “The Chinese people are watching closely. So are foreign nations, not least the United States.”
“It is all about citizens’ expectation,” said Rozelle, who’s also the co-author of Invisible China: how the urban-rural divide threatens China’s rise. “If those at the bottom of the social strata begin to lose hope of a better future as a result of the increasing wealth gap and stagnant wages, we are very likely to see the emergence of a polarised society. This is not good for the stability of the world’s second-largest economy.”
It is not just researchers who are concerned about the urgency of the problem. In January this year, Xi himself said the country’s wealth gap is not just an economic issue, but a political one that could threaten the legitimacy of the party.
“Achieving common prosperity is not just an economic issue, but a significant political one that matters to the party’s basis to rule,” Xi warned in January to his provincial-ministerial level cadres. “We absolutely cannot allow [the] rich-poor gap to increase bigger and bigger, [resulting in] the poor poorer and the rich richer. [We should] absolutely not allow an insurmountable gap between the rich and the poor.”
High stakes, little change
But despite the political rhetoric from the nation’s highest level, very little change is happening on the ground, observed Rozelle. He said China needs long-term and sufficient investment into programmes such as early childhood education and rural health nutrition. “But just like the United States, although political leaders understand the significance of these issues, as the effects of such an investment would not be seen immediately, it makes it less of a priority.”
The stakes are high for China. A lack of early childhood education, for instance, is making the country’s labour force less sophisticated in the long term, Rozelle said. In one of his studies in China’s rural Gansu and Shaanxi provinces, he measured cognitive abilities of rural students who were 13- to 14-years-old and found that around half of them will be considered as delayed enough that they would qualify for special education programmes in developed nations.
“In the past, China’s rural-urban divide enabled the country’s urban factories to exploit cheap manufacturing labour from rural areas. But many of these jobs are disappearing as the country moves up the economic ladder,” said Jan Knoerich, a senior lecturer in the economy of China at King’s College London. “Wages are going up in China, and other countries – such as Vietnam and others in Africa – are getting more competitive in labour cost.”
Rozelle agreed, adding that this changing economic structure will not just have profound economic implications for China, but social and political, too. “And as a result, a large share of those people are not going to be able to participate in the new economy. They are going to be forced into a peripheral and informal economy. It not only won’t be productive for the society, and many of them may end up being a drag for China,” he said.
Chinese economists have for many years also worried about the “middle-income trap”, a situation where a country that has reached a certain level of income gets stuck for a long time. According to the World Bank, only a handful of economies – including South Korea and Singapore – have risen from middle income to high income since 1960.
Even when these countries were still middle income, Rozelle found, the average share of the labour force with a high school education was 72%. But according to a 2015 Chinese census data, only 30% of its labour force between the ages of 25 and 65 had attended high school – a figure below the average of other middle-income countries (36%) and much lower than the OECD average (78%).
“Most middle-income countries don’t make it, such as Malaysia. This is what’s challenging for China, to move beyond manufacturing and low-skilled labour and arrive at a more advanced economy characterised by booming hi-tech and services sectors,” said Knoerich.
Wang has been thinking about this, too, after recent visits to his home village in Henan. Now at the age of 34 and living with his wife in China’s wealthy southern Guangdong province, he considers himself “a lucky one” – or “a success story” from his poor village.
“I don’t exactly know how I did not end up like my childhood friends in the village, but I’m now helping my nine-year-old nephew to get into a better school and receive a proper education,” he said, “no one wants their next generation to be left behind.”