China's Rural Labor Migration and Its Economic Development. Xiaoguang Liu

productivity. The article explains China’s economic growth well, especially the part regarding economic transformation, and emphasizes the improvement of economic efficiency brought about by the flow of factors within the non-agricultural sectors. However, in the process of China’s economic development, the improvement of the efficiency of production brought about by the flow of labor factors from the agricultural sectors to the non-agricultural sectors, represented by the transfer of agricultural labor, is equally important. Besides, human capital is improved through “learning by doing” in the process of investment and production, and the embedded technological progress relevant to fixed assets is utilized to achieve endogenous technological progress and the transfer of agricultural labor, thus exerting a profound impact on China’s macroeconomic growth model. This book attempts to better understand the specific mechanism of China’s rapid economic growth from these new perspectives, and also expects that the results of this study can provide policy suggestions for China in formulating its national strategy of development.

      ¹ The data come from the World Economic Outlook Database compiled by the International Monetary Fund.

      ² The details are as follows: Since the reform and opening-up, the level of income of both urban and rural residents in China has been constantly improved. The per capita disposable income of urban residents and the per capita net income of rural residents amounted to only RMB 343 and RMB 134 in 1978, and reached up to RMB 28,844 and RMB 9,892 in 2014, with an increase of 83 times and 73 times from 1978 in nominal terms, respectively. Based on the international poverty line of less than $1.25 of expenditure per person per day, the number of people living in absolute poverty in China fell from 835 million in 1981 to 68 million in 2013. By the end of 2014, the number of people participating in the basic endowment insurance for urban workers reached 341 million nationwide, the number of people participating in the basic endowment insurance for urban and rural residents reached 501 million and the number of people participating in the basic medical insurance reached 598 million.

      ³ For example, the International Monetary Fund (2015) cut its forecast for China’s growth rate in 2015 and 2016 to 6.8% and 6.3%, respectively.

      ⁴ The World Bank (WB) China Office: China Quarterly Update, May 2006.

      ⁵ Bai, C., C. Hsieh and Y. Qian: The Return to Capital in China, Brookings Papers on Economic Activity, 2006 (2), pp. 61–88.

      ⁶ Shu Yuan, Zhang Li and Xu Xianxiang: An Analysis of the Chinese Industrial Capital Return and Allocation Efficiency: Calculation and Decomposition, Economic Review, 2010 (1), pp. 28–36.

      ⁷ Fang Wenquan: China’s Capital Returns: A Re-estimation from the Perspective of the Vintage Capital Model, China Economic Quarterly, 2012 (11) (2), pp. 159–178..

      ⁸ Zhang Xun and Xu Jianguo: Re-measurement of China’s Return on Capital, The Journal of World Economy, 2014 (8), pp. 5–25.

      ⁹ Fan Gang and Lv Yan: Economic Development and National Savings Expansion: Extended by the Lewis Dual Economy Model, Economic Research Journal, 2013 (3), pp. 19–29.

      ¹⁰ Greenspan, A.: The Fed Didn’t Cause the Housing Bubble, The Wall Street Journal, 2009 (11), p. 15.

      ¹¹ Fan Gang and Lv Yan: Economic Developing Stage and National Saving Expansion: Extend by the Lewis’Dual Economy Model, Economic Research Journal, 2013 (3), pp. 19–29.

      ¹² Blanchard, O. and F. Giavazzi: Rebalancing Growth in China: A Three-Handed Approach, China & World Economy, 2006 (14) (4), pp. 1–20.

      ¹³ Jiang Wdei and Liu Shicheng: The Okun Model and China’s Empirical Data (1978–2004), Statistics and Decision, 2005 (24), pp. 7–9; Li Han and Pu Xiaohong: An Analysis of the Applicability of Okun’s Law in China, Commercial Research, 2009 (6), pp. 21–22.

      ¹⁴ Yin Bibo and Zhou Jianjun: China’s High Economic Growth and Low Employment: Empirical Study of Okun’s Law in China, Finance & Economics, 2010 (1), pp. 56–61.

      ¹⁵ Fang Fuqian and Sun Yongjun: Applicability Test of Okun’s Law in China, Economics Information, 2010 (12), pp. 20–25.

      ¹⁶ Lin Xiumei and Wang Lei: A Study of the Non-linear Dynamic Correlation between Economic Growth and Unemployment Rate — Reconsideration of Okun’s Law, The Journal of Quantitative Economics, 2006 (1), pp. 64–73.

      ¹⁷ Zou Wei and Hu Xuan: The Deviation of China’s Economy against Okun’s Law and the Study of Unemployment, The Journal of World Economy, 2003 (6), pp. 40–47+80.

      ¹⁸ Hu Yongtai: China’s Total Factor Productivity: The First Role of the Re-allocation of the Agricultural Labor Force, Economic Research Journal, 1998 (3), pp. 33–41.

      ¹⁹ Young, A.: Gold into Base Metals: The Growth of Productivity in the People’s Republic of China during the Reform Period, Journal of Political Economy, 2003 (111), 1220–1261.

      ²⁰ Li Yang and Yin Jianfeng: High Savings, High Investments, and China’s Economic Growth in the Process of Labor Transfer, Economic Research Journal, 2005 (2), pp. 4–15+25.

      ²¹ Li Daokui, Liu Linlin and Wang Hongling: The U Curve of Labor Share in the GDP during Economic Development, Economic Research Journal, 2009 (1), pp. 71–83.

       Chapter 2

       Overview of the Transfer of Agricultural Labor

       I. The Evolution of the Transfer of Agricultural Labor

      Before the reform and opening-up, China had implemented a stringent household registration system to strictly control the flow of farmers into cities, resulting in a separated urban–rural labor market. However, China has gradually relaxed the restrictions on the movement of farmers in policy since the reform and opening-up. The agricultural labor force has been shifting to the non-agricultural sector at an annual rate of 8 million for more than 30 years. In 2014, the number of migrant workers reached 274 million. Figure 2.1 shows the scale of the transfer of agricultural labor and the proportion of migrant workers in the total labor force, fully revealing that the transfer of agricultural labor has greatly backed up the development of China’s non-agricultural sector at least in terms of labor supply. Data show that migrant workers accounted for an average of 42.7% of the employed population in the non-agricultural sector from 1985 to 2014, and the ratio has been on the rise, especially from 33.6% in 1990 to 50.1% in 2006 and to 50.9% in 2013.

      Figure 2.1. The total number of migrant workers in China and their proportion in the total number of the employed population (1985–2014).

      Source: The data for the period 2008–2014 were extracted from the National Monitoring Survey Report on Migrant Workers by the National Bureau of Statistics over the years; for the data regarding the period 1985–2007, see Lu Feng: Reflection on Economic Catch-up by a Large Country — An Understanding of China’s Open Macro Economy (2003–2013) (Volume 1), Peking University Press, 2014, Edition 1.¹

      Besides, the transfer of agricultural labor has also been constantly strengthened, and it has experienced a gradual process from rural non-agricultural sectors to small towns and township enterprises, and finally trans-provincial areas.² Due to the shift from local employment to migrant employment, the transfer of agricultural labor expands at a deeper level and on a wider scope. For instance, the outgoing country workers only accounted for 12% of the group of migrant workers in 1985; this ratio rose to 63%–64% around 2002, and then remained mostly stable.³ Figure