An Analysis of the Institutional Path for Inclusive Supply of Rural Public Goods

Rural public goods refer to non-rivalrous and non-excludable goods that individual farmers or households cannot afford and that are mainly provided by public forces such as the government, including rural public infrastructure, farmland water conservancy infrastructure, agricultural science and technology, ecological and environmental protection, basic education, medical and health care, and social security. At present, the supply of rural public goods in China still has many problems in terms of the structure of suppliers, the decision-making mechanism and the distribution of benefits. For example, an effective complementary match has not been formed among multiple suppliers, and mismatches such as duplicated supply and absent supply are common, which violates the fairness principle of rural public goods supply and undermines supply efficiency. Rural public goods are of great significance for raising farmers' production and living standards, narrowing the urban-rural gap and achieving coordinated development of the dual economy, and their optimized and efficient supply mechanism is an important guarantee for China's smooth economic transformation. In the future, the principle of inclusive supply must be upheld and the operating mechanism for rural public goods supply must be restructured.

Existing Defects in the Rural Public Goods Supply Mechanism

Singularization of suppliers. The suppliers of rural public goods include governments at all levels, market-oriented for-profit organizations and the third sector. The three should constitute a diversified set of suppliers with a reasonable division of labor, information sharing and mutual complementarity. However, at present the supply of rural public goods in China is mainly a single supply by the government. The government fully participates in the supply of narrowly defined public goods and quasi-public goods, producing a “crowding-out effect” on market and non-governmental forces. A single supplier structure may lead to the following consequences: First, the availability of rural public goods mainly depends on fiscal budget preferences, and when other areas have higher demands on fiscal expenditure, it easily leads to a shortage in the quantity of rural public goods supplied. Second, when providing public goods the government is more inclined to “grasp the big and let go the small,” and its micro-level penetration and flexibility are far inferior to those of the market and the third sector, so a single supplier will cause the public goods needs of specific regions or groups to go unmet.

Inefficiency of demand expression and supply decision-making. The expression of demand for rural public goods should, within the framework of villager self-governance, enable all rural residents to fully express their views on bearing the costs of public goods and obtaining the benefits of public goods. In practice, on the one hand, the demand for rural public goods is increasingly diversified, advanced and individualized, and the government, as a “big and comprehensive” supplier, has clearly insufficient responsiveness, with its decision-making process mainly driven by political performance, so that scarce rural public goods cannot be allocated according to demand. On the other hand, the decentralization system concentrates fiscal power in higher-level governments, and decisions on the supply of rural public goods are usually made by higher-level governments, while the specific supply responsibilities are shifted downward level by level, which causes whether a certain rural area can obtain high-quality public goods supply to depend mainly on the local tax base and the strength of transfer payments, and makes it prone to buck-passing among governments and departments at all levels.

Imbalance between burdens and benefits. After China completely abolished the agricultural tax in 2006, the state finance's expenditure on rural public goods increased markedly and extra-institutional fundraising decreased. But the current fundraising mechanism still has many problems. Farmers still bear direct burdens such as the farmland occupation tax and deed tax and indirect burdens such as value-added tax and consumption tax, while the government's annual agriculture-related expenditure is far lower than rural residents' contribution to fiscal revenue, so their actual burdens and benefits face an imbalance. On the one hand this reflects the government's “urban bias” policy, and on the other it shows that the current fundraising channels for rural public goods are too single and the fundraising methods have become rigid. The government has an absolute advantage in the fundraising authority for rural public goods while lacking a corresponding supervision mechanism, and the fundraising capacity of farmers' specialized cooperative organizations is far from sufficient.

Path Choices for Building an Inclusive Rural Public Goods Supply Mechanism

Optimize the suppliers. First, cultivate participants other than the government, encourage various non-profit agriculture-related non-governmental organizations to register and be established according to law, support enterprises in participating in the supply of rural public goods or investing in and contracting construction projects, improve grassroots democracy, give play to the independent functions of rural communities, and separate villager self-governance bodies from the “district-based management” of township governments. Second, scientifically divide the fiscal and administrative authority relations of central, provincial, municipal, county and township governments in the supply of rural public goods, and build a multi-level division-of-labor system with clear rights and responsibilities according to the categories and levels of supply objects and content. Finally, carry out top-level design for the participation mechanism, support mechanism, interest integration mechanism, cooperation mechanism and constraint and guarantee mechanism of multiple suppliers; the government should play a leading role, select suitable suppliers from society according to specific supply goals, guide them through fiscal subsidies, tax reductions and exemptions and other means to participate in specific supply matters, and exercise effective regulatory supervision, information intermediation and protection of rights and interests over them.

Innovate supply methods and fundraising channels. The supply of rural public goods includes many methods, such as government supply, market supply, voluntary supply and mixed supply. As the level of rural economic and social development rises, the proportion of government supply should gradually decline, and market-based supply and fundraising methods should gradually become the mainstream. But the level of rural development varies enormously across regions, and the supply methods of public goods cannot be “one-size-fits-all”; diversified supply should be adopted according to local realities. Rural areas in developed regions have strong demand for quasi-public goods and relatively high expected investment returns, and the provision of development-oriented and enjoyment-oriented products and services becomes an object pursued competitively by the market, so such regions should take market supply as the main body and adopt mixed supply methods, and regions with the conditions should actively explore new supply and fundraising methods to improve the quality of public goods. Governments in relatively less advanced regions should maintain a leading position for a period of time, emphasize the principles of human-centeredness and fairness, focus on filling the public goods supply space missed by market entities, take care of the basic needs of every village without leaving any corner out, and at the same time attract volunteers and charitable organizations to join the supply process and encourage them to participate in supply decisions. In addition, we should continue to accelerate the reform of the fiscal and tax system, further reduce farmers' tax burdens, broaden the fundraising channels for rural public goods supply, support farmers in forming specialized organizations by region or business scope, pool idle rural funds, and encourage small rural public goods to be self-supplied or partially self-supplied.

Carry out dynamic management of supply operations. First, the expression of demand is not a one-off matter, nor is the response of suppliers such as the government achieved overnight; the channels for farmers to express demand must be kept smooth over the long term. For this purpose, a long-term mechanism for identifying, targeting and realizing demand must be established, so as to achieve the minimum time lag among demand formation, information transmission and decision execution. Second, for rural public goods needs that cannot all be met immediately, priorities should be determined according to urgency and importance, with emphasis on solving the supply of survival-oriented public goods in impoverished areas. While the government grasps the big and lets go the small, it should promptly open up the market, try to rate the qualifications of market entities for supplying rural public goods, and provide them with better services to ensure they have sufficient profit space. Third, we should continuously optimize the nationwide layout of financing sources; state-owned agriculture-related development banks, such as the Agricultural Development Bank, should uphold the principle of “difficult first, easy later,” give priority to using funds in the poorest places or those lacking growth potential, and give play to the role of emerging multinational development banks such as the SCO Development Bank in the supply of rural public goods. Finally, strictly supervise and oversee the supply process such as project bidding, disclose the accounts of projects of the direct fundraising type, ensure that the rights and interests of every participant are protected, and thereby maintain their long-term investment enthusiasm.

In short, rural public goods should be provided by multiple public forces in a reasonable manner according to the results of demand expression, universally benefiting all rural residents. In the future, we should uphold the principle of combining government leadership with marketization, paying attention both to fairness and ensuring the equalization of basic public services, while also respecting differences. Through comprehensive supporting reforms in related fields, we should build an inclusive rural public goods supply mechanism that is oriented to farmers' demand, led by the government, and based on the collaborative interaction of multiple actors.