The transfer of redundant rural labour to non-farming sectors will be the ultimate way to ensure sustainable and healthy growth of the economy.

It is estimated that about one third of China's rural labourers are not fully employed and that redundant rural labourers number about 150 million.

Redundant labour is the root cause of low rural production efficiency and the slow-down in the growth of farmer incomes.

The early years of this century will witness another peak increase in the number of rural labourers. It is predicted that from 2001 to 2010, there will be 63.5 million new rural labourers.

Transferring redundant labour to non-farming sectors and speeding up the urbanization process are the ultimate solutions.

Starting from the 1980s, village and township enterprises in rural areas have absorbed a large number of rural labourers. In 1996, the number of employees in those enterprises registered at 136 million.

But since 1997, when those enterprises started their structural adjustments, their capacity to absorb local superfluous labourers has weakened.

In 2000, the employees of village and township enterprises declined to 128 million.

Meanwhile, the exodus of rural labourers has become increasingly frequent.

From 1989 to 2000, the newly increased workers in village and township enterprises numbered 31.9 million while the cross-region rural labour flows registered at 43 million. Nationwide, the proportion of outflowing rural labourers accounted for 13 per cent of total rural labour. In some provinces, the ratio could reach as high as 20-30 per cent.

The outflow of rural labour has grown with gradually easing State policies.

In the 1980s, the government encouraged farmers to move, but within the sphere of rural areas.

In the 1990s, cross-region rural labour transfer and transfers to non-agricultural sectors began to be accepted. To better manage the labour flow, the government established relevant labour systems.

As reforms continue, the government began to tackle the problem of the rigid urban residence system and ease restrictions on rural labourers working in cities.

These policies, however, are not enough to further ease the free flow of rural labour.

Now the urbanization progress, an effective way of accommodating labour flows, has lagged behind economic development. Compared with countries at similar economic development levels, our urbanization rate is about 16 percentage points lower.

There are different views concerning the acceleration of urbanization.

Some hold that small towns and cities should be the focus, while others advocate the development of big cities as a priority. Still others take a laissez-faire attitude, opposing set sizes of cities.

From the experience of labour flows and the development of urbanization in the last 10 years, a co-ordinated development mode should be the choice. Both big and small cities have their respective advantages.

Big and medium-sized cities provide better working opportunities for farmers to accumulate capital. But living in these cities requires higher costs. For that reason, many farmers who have lived in big cities have returned to small ones near their home villages.

To further the development of urbanization, the elimination of systematic policy obstacles is the linchpin.

Although many restrictions on farmers' employment and free migration have been eliminated since China adopted its reform and opening up policy 20 years ago, much has yet to be done.

Currently farmers still face many obstructions when they seek to move to cities to live and work.

Some big cities restrict farmers' entry into certain industries in a bid to protect the working opportunities of urban residents. To work in cities, farmers are required to register for a variety of cards, which are often overcharged.

Those unreasonable restrictions should be eliminated. Farmers moving to the cities should be put under proper governance, but governance should not be abused.

The discrimination against farmer workers in cities not only violates the equality principle under a market economy, but obstructs normal labour flows.

The management of rural laborers in cities should be improved. Local governments should change their practice of charging fees while ignoring the provision of services.

The residence registration system should be another focus of reform.

Currently many small towns and cities have eased their residence registration systems. Some big cities are also conducting reforms in this respect.

Some believe that farmers in cities who have fixed residences and stable incomes and possess certain skills and capital should be allowed to move in.

Others hold that a freer system should be adopted, in which any farmer should be allowed in if they wish.

In the long run, farmers should be granted the right of free choosing. This will be conducive to solving the problem of inequality between rural and urban labourers.

People are rational. If farmers cannot afford the high cost of living in cities, they will move.

In rural labour transfers, an important issue is the treatment of the land of migrant farmers.

It should be noted that most farmers who have moved to cities will possibly have to depend on their contracted land as a source of living when they return from cities.

In some developing countries, there are many shabby slums around big cities. That is because farmers who go to cities have lost their land at home. Without land, they cannot return to their rural hometown and are relegated to slums.

China should draw lessons from these countries. The land contracts of migrating farmers must be protected.

Chen Xiwen is deputy director of the Development Research Centre at the State Council. Han Jun is director of the Agricultural Department at the centre.