Impoverished developing country or emerging economic powerhouse? The perception of China's fortunes matter more than ever as a trans-Pacific trade war accelerates.

Normal text size Larger text size Very large text size Yunnan, China: There is no internet in Xia Zhongmei’s village. Aged five, she won’t start school for another two years. Zhongmei, a middle child, will be strong enough at seven to join her sister on the hour-long walk to school. Xia Zhongmei sits at an outdoor furnace in Shanqiao, a village in China's Yunnan province. Credit:Sanghee Liu “They leave in the dark and return in the dark,” says her mother, Xu Xuanhua, 31, of the muddy trek the children take down the hill to Xinjie town in southern China's impoverished Yunnan province. In the damp, cold fog of autumn, Zhongmei (her name means “beautiful middle”) wears a mud-smudged pink jacket as she huddles with her family around a fire, potatoes cooking in a pot for lunch. The family grow corn for animal feed and potatoes for themselves. Cash for anything else must be earned by leaving Yunnan and travelling to the wealthy cities where there are jobs. So the adults in the family plant the crops, go away to work, and return for the harvest. “It was a bitter experience,” says Zhongmei's father, Xia Dayun, 33, recalling his time away in the brick kilns of Xinjiang in China’s far west.


'It was a bitter experience': Xia Dayun, 33, with his wife Xu Xuanhua and their children outside the concrete house built with his earnings from migrant labour in Xinjiang. Credit:Sanghee Liu But with the money he earned, Xia built the family a concrete house in the hillside village where he grew up, and where his elderly father and mother still tend chickens. Things are improving – the government built the first sturdy concrete road up the hill last year. Follow the road another four kilometres and you reach the mountain school where the famous “Ice Boy” caused an internet sensation across China in January. Images of eight-year-old Wang Fuman arriving to class with frosted hair and eyebrows, after walking two hours to school in winter, went viral on social media. The image shocked comfortable, urban China. He was among the 9 million so-called “left behind” children in rural China who are raised by grandparents because their parents are away earning cash in the cities. Around 61 million rural children have at least one parent working away from home for most of the year. Ice Boy's story highlighted the huge divide in the life prospects of China’s children depending on where they are born. Forty-two per cent of China’s 1.3 billion population are rural residents. China has lifted 68.5 million people out of poverty over the past five years, but another 30 million rural households remain below the line.


The per capita annual disposable income in Beijing is 46,426 Chinese yuan ($9230). But in Yunnan province, it is just 14,187 yuan. The villages Fairfax Media visited are in the hills surrounding Zhaotong city, where 1.13 milion people live below the poverty line, making it one of the poorest regions in China. Near Ice Boy’s school, Fairfax Media met Xia Dongqiao, 49, as his wife returned from the fields carrying a heavy basket filled with potatoes she had dug from the cold earth. The tree branches are heavy with frost. The wife of Xia Dongqiao returns to their home in Zhuanshanbao village with roughly 40 kilos of potatoes on her back. Credit:Sanghee Liu Inside the family living room, Xia’s 15-year-old daughter is scowling, as teenagers do, and thirsty for water that has been boiling on the coal-fired stove. The school is close, just five minutes' walk, but Xia says the teenager no longer attends classes. A government education subsidy covers nine years of education – so it is rare for local children to continue to high school, he explains. She will have to work. According to a new book, China’s Invisible Crisis: How a Growing Urban-Rural Divide Could Sink the World’s Second-Largest Economy, only a third of China’s workforce has completed high school.


China faces a shortage of the skilled workers needed for the high-tech industries that its leadership hopes will propel China to become a high-income country like neighbours Japan and South Korea, claims author Scott Rozelle. Xia Dongqiao, 49, in his home in Zhuanshanbao, a village in Ludian County, Yunnan. Credit:Sanghee Liu For China’s economy to take the next step, it will no longer be good enough to have an army of cheap rural labour making the trek to city factories. If the rural population - not just the offspring of city "tiger mothers" - are taken into account, China has one of the lowest education levels of any country, argues Rozelle, a Stanford University professor. This contradiction - that the world’s second-largest economy remains a developing country with millions of poor - has been thrust into the economic spotlight this month, because it is also at the centre of the bitter trade dispute between US President Donald Trump and Chinese President Xi Jinping. Xi says China is both innovative and the world's biggest developing nation. Chinese President Xi Jinping with US President Donald Trump in Beijing in November 2017. Credit:AP


Trump has tweeted that it is "unfair to the US" for China to be considered a developing nation by the World Trade Organisation, because it "therefore gets tremendous perks and advantages, especially over the US". Under World Trade Organisation rules, developing countries have special concessions on intellectual property (IP) protection, in the belief that transferring technology from advanced nations to developing nations is good for productivity. Loading China has a track record of requiring foreign companies, such as carmakers, to form joint ventures to enter its market, a typical scenario where foreign IP has leaked to the local industry. But the Trump administration now views China as a technology rival and wants an end to what it calls technology theft. The US has asked the WTO, how can a nation with the largest number of supercomputers in the world, and the fastest high-speed trains, be a developing country? Xi, in his speech to APEC last week, warned the special treatment of developing countries shouldn't be challenged.

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