The Changing Foundations of Chinese Development
Book manuscript in progress
My book, The Changing Foundations of Chinese Development, reveals an ongoing transformation of the Chinese 'migrant miracle' -- an export-led growth model reliant on the maintenance of a self-replenishing source of cheap labor. This migrant miracle is driven by a form of wage suppression enabled by the employment of rural migrant labor: villagers who circulate seasonally between villages and cities. These laborers can work in cities but must reside in villages. There, their families farm village land for subsistence: this is how they withstand low wages in cities, by supplementing their wages through farming.
China's villages effectively subsidize labor costs in cities. They also fund the schools, health care, and welfare benefits that support future generations of laborers. Yet they do not collect tax revenues that accrue from the low-cost production that they subsidize. As a result, today these rural governments are facing fiscal crisis. Their response has been to pursue a new form of growth that is dominating the Chinese landscape today: domestic, not export-oriented growth, focused on infrastructural spending and urban construction. Rural governments participate by selling rural land to developers for real estate development. The revenues, taxes, fees, and collateralized mortgages that accompany these land sales now supply 77.7 percent of local government revenues nation-wide.
Beneath this shift in the Chinese economy, there is a vast human cost. The foundation of China’s migrant miracle lies in the fact that the state has granted rural people universal use-rights to rural land, allowing them to withstand low wages and irregular employment. But the transition toward rural land sales as fiscal redress is destroying the subsistence farming economy that has for decades supported Chinese labor. The scope and pace of this change is unprecedented. Of China’s 400 million migrant workers, 88 million of them, 1 in 5, have lost their land, and this means they will no longer be able to rely on subsistence farming to withstand the low wages of Chinese industry. In the new China, cities are rapidly expanding as land sales boost a booming real estate market. But in the countryside, an old way of life is disappearing. It is being cannibalized by a new form of progress. This ongoing transformation, and its impact on the rural Chinese people who power the global export economy, is at the heart of this book.