The Intersectoral Terms of Trade and Their Impact on Urbanisation in China

The historical experience of developed countries shows that the economic development process and accompanying urbanisation represent a structural transformation from an economy dominated by agriculture to one dominated by non-agricultural activities. Therefore it is generally believed that the agricultural sector needs to make a net transfer of resources, both capital and labour, to other sectors in the processes of economic transformation and urbanisation. However, the process of urbanisation in a socialist economy can be negatively affected by its pattern of resource generation. On the basis of an analysis of the 'scissors' pricing mechanism to which the state had recourse for financing its industrialisation, this article argues that this kind of resource transfer did not necessarily favour a high rate of urban employment and urbanisation, regardless of the magnitude of the seizure of resources from the agricultural sector.