By Zhang Junkuo

Research Report No 109, 2006

The coordination of interest relations among various social entities and aspects is the basis of and key to social harmony. Without such a coordination, there will be no social harmony. Therefore, to build a socialistharmonious society, it is vital to identify the fields where the interest relations in China’s social development is not harmonious and study the cause of the disharmony in order to gradually make adjustment through policy measures and system construction.

I. Main Aspects of the Disharmony of Interest Relations

In light of the country’s current situation, the following five interest relations --- relations between labor and capital; between urban and rural areas; between different regions, between different industries and between different strata --- reflect prominent problems and need major adjustment.

1. Labor-capital interest relations

Labor-capital relations is one of the most important interest relations in the modern market economy. The harmony and stability of such relations are to a certain extent the barometers and wind vane to judge whether a modern society is harmonious and stable.

China is a large country with a population of 1.3 billion. It is in the transition from a traditional dual-economy society to a modern society, from a planned economy to a socialist market economy. These three factors exist and occur at the same time, which makes the country face severe labor surplus and employment pressure in a fairly long period of time. At a time when China’s legal system is not complete on laborers’ organization and protection of laborers’ legal rights, the laborers are naturally in a disadvantageous position in the course of the game between the capital and labor. And this will exist in a long period of time. As a result, the cases of infringement upon laborers’ legal rights have occurred frequently. This problem is particularly serious in the industries such as manufacturing, building and mining industries which employ a large number of less-educated laborers and migrant farmers. Their wages are low and often defaulted. The long working hours and harsh labor conditions are very common, leading to tense labor-capital relations. This has become a very serious problem that affects the building of a harmonious society.

2. Urban-rural interest relations

Up to now, nearly 60% of the 1.3 billion people live in the countryside. A kernel mission of the modernization is to attract rural population into the non-agricultural industries through the vigorous development of non-farming industries so as to raise the productivity, income and living standards. But the country has a huge rural population but less arable land. The transfer of rural population to non-agricultural sectors will be a long process. Under this circumstance, we should consider that, in the course of a transition from a dual economy, how we should properly solve the problem related to income increase and development of the population who will continue to stay in the countryside and do farming in a fairly long period of time so that they would also fully enjoy the result of the country’s development, instead of being marginalized in the course of modernization and industrialization.

Since reform and opening up, China has made substantial progress in rural and urban development, and the people’s living standard has improved greatly in the countryside and the cities. But at the same time, the gap between the incomes and living standards of urban and rural residents have not been narrowed, but expanded. For instance, in 1978, the ratio of urban and rural resident’s incomes was 2.6:1. In 2004, it was enlarged to 3.2:1. If the welfare-based housing, healthcare, education, transport and public services enjoyed by urban residents are included, the gap would reach 5:1 or 6:1. Although it is inevitable that a gap exists between the countryside and the cities due to varying productivity rates, the difference has obviously exceeded the normal and rational level. It should be particularly pointed out that the gap between the incomes and welfare of urban and rural residents has not been determined by productivity rates, but by the urban-rural separation system and different policies. Therefore, it is even more unreasonable. Without a basic coordination of urban-rural interest relations, there would never be social harmony in the real sense.

3. Inter-regional interest relations

Although there are different ways to calculate the income and living standard gap between different regions and the results vary, it is a fact that the gap is being widened. Such a gap exists not only between the eastern coast, the western region, the northeastern region and the central region, but also between the developed regions and regions with the same varying problems, such as resource-exhausted areas, the old revolutionary base areas, areas inhabited by ethnic minorities, frontier areas and poor areas and ecologically fragile areas. China has a vast territory. It is natural that there exist differences in terms of development and income in various regions due to a vast territory, different resource conditions and development conditions. But the question is that the regional gaps are to a great extent caused by policy and system factors, which is likely to trigger resentment of cadres and people in the less developed regions. For instance, the eastern coastal region developed first with the support from the state’s preferential policies in the early years of reform. But in the vast inland areas, including the central and western regions, where the natural conditions are not as good as that in the east, the development has naturally lagged behind the eastern region due to lack of policy support. After the country adopted the western development strategy and northeast rejuvenation strategy, the six provinces in the central region have become a few areas that do not enjoy the special policy support from the central government. This would inevitably cause complaints by local cadres and people.

The regional development gap and the disparity between different living standards due to policy differences have been too big and existed for a long time. This is not conducive to enhancing the unity of the cadres and people of various regions, or boosting their enthusiasm. Therefore, reform and policy measures must be adopted to adjust regional relations in order to build a harmonious society. The principles of adjustment should first of all narrow the policy differences as much as possible to create a fair environment of competition. Regional preferential policies should be made in light of the specific problems of different regions. Second, the gap caused by the policy differences in development and living standard levels should be compensated to a certain extent. Finally, the principle of public service quality should be adhered to so that all the residents would enjoy the fairly same level of welfare.

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