What is equity and efficiency? Equity in China’s) economy is the distribution of wealth, labor income and land ownership (Gupta et. al, 1999). Efficiency is related to how fast the economy grows. In China’s economic development equity is a moral goal which is inseparable from fairness and social justice. China’s economy has been the most rapidly growing economy in the world. With the rapid growth the disparities in income, social inequalities and opportunities are increasing (Guo, 2010). Initial condition, government policies and location contributed to this situation in China. This essay will present three solutions to the tradeoff between equity and efficiency in China’s economic development: to change the land policy for peasant farmers to make better use of their land; a perfection of welfare and social security; to change or cancel the household registration system so that more people in poor areas can migrate to other urban areas to find a better job. However everything has two sides. Each of these solutions has advantages and disadvantages, the perfection of welfare and social security is the efficient way in a long time. This essay will evaluate these solutions according to the criteria of feasibility, cost and time horizon.
There still exist disparities between rural and urban areas in China, so the land policy which aims to the reduction of taxes is necessary and helpful in this situation. With the rapid development of China’s economy, land is re-zoned for urban use. On this condition, peasant farmers in China only can be compensated agricultural value of the land instead of compensation of the actual value of their land (Dollar, 2007). However, the commercial value of the land which contributes to the development of urban areas is far higher than any agricultural value. So land policy should be carried out so that farmers can use their land efficiently. Then there can be a reduction in disparities between rural and urban areas. Although the land...