Q&A October 6, 2020

A Conversation with Scott Rozelle & Natalie Hell on their New Book, Invisible China

In their newly released book, Scott Rozelle and Natalie Hell explore how the great disparity in human capital across rural and urban China is inhibiting China’s rise from a middle-income to a high-income country. We sat down together to learn more about the invisible economic challenge China faces.
Book cover for "Invisible China: How the Urban-Rural Divide Threatens China's Rise" and a quote from Scott Rozelle, "The entire population of 800 million people has become almost fully invisible over the past decades..."

As the glittering skyline in Shanghai seemingly attests, China has quickly transformed itself from a place of stark poverty into a modern, urban, technologically savvy economic powerhouse. But as Scott Rozelle and Natalie Hell show in Invisible China, the truth is much more complicated and might be a serious cause for concern. We sat down with the authors to learn more:

Q: Your book is titled Invisible China, but what does that really mean? What’s invisible about China?

A: The “invisible China” is easy to define. Invisible China is rural China. China’s population is now 1.4 billion people, but what many don’t realize is that more than 800 million of them live in rural China. They are the workers, the families of the workers, the elderly, and the children that reside in villages and migrant communities throughout the nation.

Q: Has rural China always been invisible?

A: When I [Rozelle] first started working in China, more than 85% of China’s population lived in rural communities, often working as farmers or in rural factories. In those early days most city-dwelling college students, professionals, and government officials also came from these rural communities, frequently going between the city where they worked and their home-village where their immediate family remained. They would travel across the country in buses, traversing the countryside on the nation’s poorly developed roads and stopping for the night in small village guest houses on their long journey home. Although they had moved on to living in the city, their families and visits kept them connected and aware of rural life in China.

Today it is so different. Less than 5% of students in elite universities in China have any rural roots. Buses are a thing of the past, if you don’t fly across the country, you get on a high speed rail at 350 km/h, and at that speed it’s almost impossible to even take a picture of a farm field or village road—without a connection to a rural village many of these students aren’t even aware there is a different way of life in China outside their busy urban lifestyle. But this isn’t even a localized problem. The media, both China and international, focus is on what is happening in Shanghai, Beijing and Shenzhen. We get almost no glimpse of how the other two-thirds of China lives and works and grows up. 

Q: The conventional wisdom is that reliable data in China is hard to come by. But this book is full of data. How did you achieve that? 

A: It's true that every conclusion we make in this book is based on data we collected firsthand with partners in China—literally millions of data points from rural communities in virtually every province in China. And it's also true that firsthand data is difficult to get ahold of in many contexts, and China is no exception. That's why empirical, evidence-based research is so important—it allows observers to see the invisible, to see the whole picture. The only way to do this is to get your hands dirty and collect the data. That's what we've been doing with our colleagues in rural China for almost 40 years. The findings in this book are the result.

Q: The book’s subtitle implies that the invisible China, or rural China, threatens China’s economic growth. Why is that? What makes it so vulnerable to future economic growth slowdown or stagnation?

A: If you look at the OECD statistics, which are reported directly from China’s government, what may jump out at you is that China, in fact, is one of the most uneducated countries in the entire middle-income world. According to the 2015 national census, only 3 out of 10 individuals in China’s labor force have ever attended high school. This means in China’s 800 million-strong labor force, 500 million people—almost entirely from rural communities—have at most only completed junior high school.

I often say this is the biggest challenge that China faces - that no one knows about.

In China’s 800 million-strong labor force, 500 million people—almost entirely from rural communities—have at most only completed junior high school. To be clear, these numbers are from China's own 2015 national census.
Scott Rozelle

Q: Why is it that having a lower educated labor force might be a trigger for poor economic growth?

A: Being a student of development economics, I think that there are potential lessons that we can learn by looking at the experiences of other countries that have uneducated labor forces. To be clear, many countries with poorly educated work forces do quite well at first—that is, in the early stages of development as they move from poor to middle income. If you have a labor force that can read and write a little and is disciplined, they make great factory workers. They can work long hard hours on your construction projects and help grow the country’s economic success.

But as a nation begins to move beyond middle-income, things change. When a country is a high-income country in today’s world, the labor force needs to be able to do high-skill, high-technology jobs. They need to be able to learn new skills and change jobs as the economy shifts around them. This ability makes a productive labor force. Without the foundational skills to learn new jobs, workers turn to low skill jobs, which become few and far between, or the informal sector, where stagnant wages and insecurity prevail. When this happens to a large enough fraction of the population, growth stalls. South Korea, Singapore, Ireland invested in the the education of their labor forces when they were still middle income countries, and they made the transition to high-income. But, the countries that did not develop the human capital of their labor forces—Brazil, Mexico, Turkey, South Africa (and scores of other nations)—have been stuck in the middle-income trap for decades and show no sign of escaping. China’s labor force is less educated, according to the OECD metric, than all of these trapped nations.

On top of it all, China today is automating faster than any country in the world. Its massive construction projects are all done. Global supply chains are inducing firms to move into other parts of the world. And this was before the international tensions caused by COVID-19 and other political factors. Already over the past five years manufacturing jobs have been falling; construction jobs have stagnated and begun to decline. The fastest growing employment sector in China today is the low-skill, low-wage informal economy. And, again, these trends are according to China’s own published statistics. 

Q: There is a strong perception that the Chinese highly value education. Many people think China has one of the largest and most effective education systems in the world, but that’s a very different story from what you’re telling me. Why is that?

A: China does have a strong education system and deep commitment to giving their children one of the most demanding schooling programs in the world. This is the system that is in most cases run by urban educators in China’s cities. But China also has a system that is not so strong and lacks the resources and commitment to providing all of the children in their jurisdiction with the top learning environment in the world. This is the rural schooling system.

China also has [another] system that is not so strong and lacks the resources and commitment to providing all of the children in their jurisdiction with the top learning environment in the world. This is the rural schooling system.
Scott Rozelle

Q: Why is there such a gap between urban and rural education in China?

A: First, we'll tell you what it is not. China’s schooling gap is not due to rural families not having schooling aspirations for their children. In our surveys, even when children are young, parents say that they want their children to excel in school and will invest any amount of time and money to facilitate the child’s schooling goals. Even today, however, when the children get to mid-teens, only about 4 out of 10 students can make it into academic high school.

Middle school kids work at desks in a run down classroom in rural China.The source of China’s schooling problem is actually similar to the source of the problem of poor education in large parts of the US. In the US, school funding is a local expenditure. Much of the funding comes from local property taxes. Hence, in poor areas of the US where housing prices are low, mainly due to the fact that many people in the area have low income or are unemployed, property taxes are insufficient to provide a high quality of education. The quality of education in an area plagued by poverty is systematically lower than areas where the average family is better off.

As it turns out, China has a just as decentralized system of governance, in terms of its social policy (including areas of health, unemployment and schooling), as the US. The tax base in rural China is much lower than that in the urban areas. In addition, individuals that do make it successfully through the education system in poor rural counties, almost always leave the county for higher education opportunities and work outside their rural hometown, never to return. This means there is ultimately no incentive for local government to invest more in schooling.

It’s because of this funding gap that China’s high-profile urban students and invisible rural students likely have one of the greatest education divides in the world.

Q: Why should someone in the United States – or why should someone in Europe or elsewhere in the world outside of China – be interested in the conclusions of your book?

A: It all boils down to three reasons: Humanistic; Economic; Political.

The first one probably only applies to a relatively small subset of people from the US and certainly a larger share of people who live in China. “I am interested in the conclusion of this book because I want those that live in rural China to avoid the suffering and hardships that would definitely fall most heavily on their shoulders should the economy stagnate or collapse.” Over the past forty years (maybe over the last 4000 years), those people from the rural communities in China have worked very hard. Due to their hard work and sacrifices, their standard of livings have risen alongside China’s economy. To be clear, rural households mostly are still part of China’s low income class. However, they are not in poverty. As a citizen of the world, and as someone who has spent a lot of time with these rural families and the rural individuals all around the country, I don’t want to see the future of these people collapse and have them fall back into grinding poverty. Indeed, this is a philanthropical motive. But, Natalie and I have always believed every child—whether from China or the US—are equally deserving of having a nice life.

Second, there’s an economic motive. Regardless of what you’ve heard in the popular media lately, the economy of the US has benefited tremendously from its relationship with China. From the flow of so many of the goods that we buy and consume (at reasonable prices), to investment opportunities for tens of thousands of US firms and individuals. Having a good, collaborative relationship with China will bring good things to many people. Losing a vibrant China will hurt the US in general. Now, to be sure, there will be losers, of course. There always are winners and losers in trade. This is why we need good local governance - in the US -  to address the downsides of those that are hurt, so that we can all in turn enjoy the upsides.

Finally, and I’m not a political scientist so I’m not going go very far down this road, but let’s think about the different scenarios that could happen if China’s economy were to stagnate or contract sharply. The legitimacy of the government for the past 40 years has been based on economic growth. If growth were to stall, would the government use other approaches to boost their legitimacy? I am not saying it will happen. But other countries that have faced similar political choices have taken action to stoke nationalism and get citizens to throw their support to the leadership—despite a falling economy. Again, I am not saying this is going to happen, but to avoid even the chance of it happening, we (outside of China) should not want China’s economy to fail.

Q: So, what should China do to make sure this fall doesn’t happen?

A: We suggest China should (re)listen to the advice of Deng Xiaoping: Keep a low-profile internationally. China will not be able to take advantage of international positions if their own economy stalls. They need to re-focus their attention on the domestic economy, and we know that when China fully focuses on addressing a problem, they have been quite successful in solving it in the past.

We believe that China, as a nation, should focus a great deal of effort on solving their rural human capital problem. The central government needs to take control of this. It cannot be solved by local governments. They need to invest in the rural children and schools, from preschool through high school, and even before! China benefits from having all rural children thrive in school so that they can be the foundation of a high-skilled labor force ready to power China’s future economic growth.  

Scott Rozelle

Senior Fellow at FSI and Director of the Rural Education Action Program
Author
Dr. Scott Rozelle

Natalie Hell

Author
Headshot of Natalie Hell.

Join Us October 30 for a Book Talk with Author Scott Rozelle

Join us for a virtual book talk event with Professor Scott Rozelle as he discusses his new book with Professor Hongbin Li, a senior fellow at the Stanford Institute for Economic Policy Research and director of the China Program at the Stanford King Center on Global Development. A question and answer session with the audience will follow the discussion.

Friday, Oct 30 at 1pm