Study On China’s Investment In Rural Infrastructure And Its Influencing Factor

Since the reform and opening up, along with the high-speed growth of its economy, China has seen a great development in its infrastructure. However, for quite a long period, the investment in infrastructure has been favoring cities. At the beginning of the21st century, in response to the imbalance between the investment in urban and rural infrastructure, Chinese central government begins to expand the investment in rural infrastructure. To this, for eight consecutive years from2004to now, in No.1Document of Chinese Central Government strengthening construction of agricultural and rural infrastructure is adopted as an important measure to drive the rural reform and development. According to the statistics, nearly RMB600Billion of budget of Chinese central government has been invested in the construction of agricultural and rural infrastructure during the11th Five-Year Plan, with an annual scale from RMB60Billion in2006to RMB192.8Billion in2010, up2.2times, accounting for49.1%over47.8%in previous total budget of Chinese central government.Driven by the investment of Chinese central government, the passion of local government, farmer and enterprise for investment in agriculture is increased. During the11th Five-Year Period, an accumulated fixed assets of RMB2.6Trillion has been invested in agriculture, forestry, animal husbandry and fishery, annually increasing by28.3%,4.9%higher than the10th Five-Year Period (National Development and Reform Commission,2011). Now that China’s investment in rural infrastructure has been increasingly expanded, how does the general status of investment look like and what’s the change? Is the structure of investment in rural infrastructure reasonable? What’s the difference in the investment of rural infrastructure among different regions? Is the degree of imbalance significant? How satisfactory do the public peasants feel about the investment? What are the further factors influencing the investment? How serious do the influencing factors seem? How to respond it?For answering issues described above, the thesis, themed by investment in rural infrastructure, in the forms of statistics analysis, questionnaire survey and panel data model, etc. firstly conducts an analysis on the general status of investment, then on the structure of investment object, further on the difference and imbalance of the investment in eastern, central and western regions, and finally on the factors influencing the investment by citing an example based on which a finding is obtained. Corresponding suggestions on policies are proposed in accordance with the finding.The study project and findings of the thesis made up of seven sections are as follows:Case1:Analyzing the overall investments into the infrastructure of rural areaBy using two primary indices-fiscal expenditures to support agriculture and part of investment into rural fixed assets related infrastructure, the author conducts an analysis on the general status of investment and its changes. The findings indicate that in the view of fiscal expenditures to support agriculture, its absolute value has been constantly increasing over the17years’period (1994-2010); but in the view of relative value, its proportion in national fiscal expenditure has experienced a down-to-up process. Over the period, about50%fiscal expenditures to support agriculture fails to meet the stipulations as set forth in Agricultural Law of the People’s Republic of China, in the view of part of investment into rural fixed assets rela-ted infrastructure, its value has been on the rapid increase from2003to2010, up5.40times compared to the first year; but its proportion in investment into rural infrastructure of the whole society was oniy8.27%by2010. The two data demonstrates the inadequacy of total investment into rural fixed assets is quite obvious, and the favor of dual economic structure of urban and rural area has not been reversed.Case2:Analyzing the investment structure of infrastructure of rural areaThe thesis firstly carries out analysis on the total value and changing tendency of the investment in rural infrastructure which consists of two categories and eight subclasses; and makes a general evaluation on the structure of the investment. Findings thus obtained include:1. Economic infrastructure is rapidly developed, whereas social infrastructure lags behind.2. The investment in farmland irrigation establishment of rural economic infrastructure is significantly inadequate, with which farmers are not very satisfied.3. The investment in rural social infrastructure is generally inadequate, with rural culture facilities being the most noticeable.Case3:Analyzing the regional difference and imbalance of investments into infrastructure of rural areaIn the thesis, rural area is divided into three regions:eastern, central and western. The analyses on regional difference are separately conducted from the points of total investments into the rural infrastructure and its per-capital quantity, composition of investment subject, direction of investment and investment demand. Eventually, particular analyses are executed on the imbalance of investments into all regions by calculating the specific indices of2003to2010, which show the imbalance in the investment of rural infrastructure, such as rural population, agricultural area, total infrastructure investment, GDP of primary industry, local fiscal revenue and expenditure. The findings obtained mainly include:The total investments and the quantity per capita are on a growing trend, but the growing trends in the different regions are significantly different. Since2003, the increment speed of the eastern region is significantly faster than the central and western regions, thus resulting in an increasing difference among eastern, central and western regions. After2008, owing to the accelerated increment of the western region, the difference between central and western regions has been significantly narrowed.The proportion of eastern investment in non-farm households is much higher than the central and western regions, while central and western regions are roughly equal.The emphasis of investment is different in three areas’. For example2010, the proportion of eastern investment in energy, education, culture is much higher than the central and western regions, while that in transportation and postal is far lower than the central and western regions.In different regions, there are significant differences in the needs of farmers. Specifically, in the eastern region, the farmers’strongest needs are rural education and rural medical treatment. In the central region, farmers’strongest needs are energy facilities and small-scale irrigation and water conservancy facilities. In the western region, farmers’strongest needs are rural roads and small-scale irrigation and water conservancy facilities. Central and western regions are quite different in the needs from the eastern region.As for China’s investment in rural infrastructure, whether in case of rural population, agricultural area, total output value in primary industry, or total infrastructure investment, and/or local fiscal revenue and expenditure, the imbalance is generally in existence. Among the29regions analyzed in the thesis, in the year of2010, there are only ten provinces, municipalities and autonomous regions whose∑di is greater than0, whereas, those with∑di less than0are19provinces, municipalities and autonomous regions, which largely explain the overall lack of investment in our rural infrastructure. Particular imbalance of the three regions presents that the eastern region is relatively going ahead of the central and western regions, of which the latter is lagging more behind, whose imbalance is changing in a wave-like mode and is not evidently expanded or shrunk.The2010imbalance indexes of all regions, from the lowest to the highest, are ranked in such order:the first and second are separately the local fiscal revenue and the local fiscal expenditure, suggesting that the level of economic development is an important factor influencing the investment in rural infrastructure;the third is total infrastructure investmen, indicating that the nation has recent years increased the support for agriculture and focused on the industry nurturing agriculture, the situation of total infrastructure investment favoring the cities has been reversed; the last two are rural population and agricultural area, showing that the current investment in rural infrastructure subjects more to the level of economic development, and includes less consideration about the actual total demand in rural area.Case4:Analyzing the factor influencing China’s investment in rural infrastructureFirstly, the author tries to analyze the main factor influencing China’s investment in rural infrastructure as well as its mechanism of action theoretically, then builds an econometric model, and uses related data to further empirically analyze the influence of total investment, structures and regional difference of rural infrastructure investment. The main conclusions are:1. More than91%Logarithmic change of total rural infrastructure investment could be explained by the changes of the influencing factors as logarithm of economic development level,) ogarithm of upfront rural infrastructure investment, fiscal decentralization, rural population density, urbanization level and political factors, etc. Among these factors, economic development level, logarithm of upfront rural infrastructure investment and fiscal decentralization are leaving significant positive impact on rural infrastructure investment; meanwhile, the impact of rural population density, urbanization level and political factors of Western development is non-significant.2. Only36%changes of rural infrastructure investment structures could be explained by the changes of the influencing factors as logarithm of total rural infrastructure investment, logarithm of economic development level, fiscal decentralization, rural population density, urbanization level and political factors of Western development, etc.3. About94%of rural infrastructure regional difference changes could be explained by the changes of the influencing factors as logarithm of total rural infrastructure investment, logarithm of economic development level, fiscal decentralization, rural population density, urbanization level and political factors of Western development, etc. Among these factors, logarithm of total rural infrastructure investment and logarithm of economic development level are having significant positive impact on rural infrastructure regional difference. Meanwhile, the impact of fiscal decentralization, rural population density, urbanization level and political factors of Western development is non-significant.In view of above conclusions, this paper brings forward the policy proposals as follows:First, establishing an investment decision-making mechanism of combining "top to bottom" and "bottom to top" modes into one entity; Second, improving the tax distribution system of China’s financial system, intensifying the support of finance and taxation policy; Third, Innovating supply system.