People traditionally tend to take it for granted that urban infrastructure such as power, roads, schools and hospitals should be financed by the State, while in the rural areas farmers should shoulder the majority of those costs.

In line with this logic, various fees have been collected from farmers to provide public infrastructure in the rural areas.

In 2000, taxation and fees on farmers amounted to 177 billion yuan (US$21.3 billion), with the fees standing at 95.3 billion yuan (US$11.5 billion).

Yet farmers only earned about one third the income of urban residents, so why should the State provide public goods for urbanites while rural people cannot enjoy similar benefits?

In recent years the State has adopted a pro-active fiscal policy, injecting a large amount of capital into infrastructure construction.

The problem is that urban areas have become the major beneficiary of this investment, widening the gap between urban and rural infrastructure input.

For example, more than 660 billion yuan (US$79.5 billion) in treasury bond funding was invested in national construction projects between 1998 and 2002. During the same period, only 189.7 billion yuan (US$22.9 billion) was earmarked for rural construction. In addition, part of the funding was used for environmental improvements and consolidating river projects, which benefit the whole society.

This preferential investment strategy has led to a growing disparity in infrastructure levels between urban and rural areas.

Many of China's cities have become more and more beautiful while many of its rural villages do not have roads to connect to the outside world. Nearly half of all villages do not have access to tap water.

Medical care is another key area in which rural people suffer as a result of differentiated policies.

Snail fever disease, for example,which was eradicated thanks to nationwide efforts in the 1950s, has resurfaced and risks spreading in the rural areas.

Still, China is poised to provide more investment in the rural areas, and there are three major reasons for such an effort.

First, the nature of rural infrastructure constitutes an integral part of a country's public goods, so a unified policy should be applied to infrastructure construction.

In a society there are generally three kinds of public goods provided by the government. One is infrastructure directly provided by the government, such as education, defence and medical care. The second is what is indirectly provided by the government, which uses fiscal discount, taxation and price policies to encourage private entities to provide public benefits such as medical care insurance and environmental protection.The third is public goods provision and maintenance required by the government via drafting laws.

Despite their formal differences, all these benefits should be provided by the government for all citizens - regardless of where they live.

All people should enjoy the same rights of living and development that are ensured by adequate public goods. If some groups enjoy the preference of accessing public benefits at the sacrifice of others, then the latter will lose some development opportunities, which will incur social inequality.

Besides, public funding comes from all taxpayers. The distribution of capital should abide by the principle of equality and fairness. No discrimination should be allowed.

Chinese farmers are a special group. They have made tremendous contributions to the country's industrialization and urbanization over the past several decades.

In the planned economy period, farmers contributed a colossal amount of capital for the country's construction. Without that capital the country would not have seen its industrialization process go smoothly.

When industrialization reaches a level that enables the country to enjoy significant improvement in its economic strength, it is time for it to provide, in a large scale, public benefits for farmers.

Since the 1990s urban residents have enjoyed increased investment in their infrastructure construction, which squeeze out some of the development opportunities for farmers. Now is the time for the State to inject some fresh blood in the rural areas to pass on some of the fruits of industrialization.

Providing public goods for farmers will also help stimulate the domestic consumer market, which has remained stagnant in recent years.

Without the push of the farmers, who account for about two-thirds of China's population, the whole market will not become active.

Since the 1990s the problem of weakening purchasing power of farmers has been evident. This is, on the one hand, the result of farmers' low income level; on the other hand, inadequate public goods in the rural areas have blocked farmers' consumption of industrial goods. They have to pay for local public goods construction.

From the perspective of stimulating the national consumer market, providing more public goods for farmers will directly reduce their spending and create a sound consumption environment in the rural areas.

To improve the situation, the mentality on rural public goods provision must first be updated. Rural public goods provision should be given equal consideration with urban public goods construction.

Policy-makers should become aware of the significance of increasing public goods in the rural areas. It will be better if the policy could be established through making a law governing this aspect.

Second, the government should adjust the structure of the use of treasury bond funding.

More such funding should be earmarked for agriculture and the rural areas. The shortage of rural infrastructure is mainly caused by shortage of capital.

Third, the focus of rural investment should be shifted to rural people's production and living environment.

The State formerly invested heavily in protection of environment along the major rivers and lakes. This is a correct move.

However, such projects benefit the whole society. More funding should be specifically earmarked for local small infrastructural projects to directly push forward the rural development.

Given the serious infrastructure disparity in the rural areas, the government will not earmark adequate funds to fill the gap. It should select some major small and medium-sized projects, such as water-saving irrigation projects, roads, water, medical care, telecommunications, school building and establishment of a market information system.

This will create a sound development environment for the living and consumption of farmers.

The author is director of the Industrial Development Institute under the National Development and Reform Commission.

(China Daily 05/18/2004 page6)