A Tale of Two Decades

Rural income growth substantially slowed down in the 1990s, both relative to the growth rate in the 1980s and relative to contemporaneous GDP growth. This was the start of the phase of Chinese reform era in which the majority of the Chinese population gained a decreasing share of the GDP improvement. The pivotal moment was 1993–94, when China’s central bank recentralized finance and banned private finance. The Chinese state prioritized urban development at the expense of rural China. Rural enterprises began to falter owing to rising credit constraints. Capital constraints increased and labor adjusted in response and rural labor migration rose dramatically beginning in the mid-1990s, a development, while partially offsetting a broad rural plight, that was to leave a detrimental impact on rural human capital in the long run.