Background
Despite rapid urbanisation, China is a predominantly rural society, and developments in the rural sector will be a major determinant of China 's economic and social trajectories for some time to come. This has special relevance to efforts to resolve China 's current employment problems. In 2001 almost 800 million people still lived in the Chinese countryside and depended on the rural economy for a living.
Under the impact of post-1978 reforms, the rural economy has become increasingly diversified, so that rural, non-agricultural activities now contribute more than farming to rural GDP. Township and village enterprises (TVEs) have played the most important part in this transformation, although construction and rural services have also made major contributions. Such changes are mirrored in rural employment patterns, TVEs alone having created over 100 million new jobs between 1979 and 2001. The rural labour force now constitutes two-thirds of the total labour force, while agriculture alone accounts for 45 percent of all jobs throughout the national economy.
The burden of providing the basic welfare needs of China 's rural population is a huge one. The economic success of recent rural reforms is attributable to decentralising, liberalising, diversifying and autonomy-enhancing tendencies. Such tendencies have, however, left a vacuum in terms of unemployment provision, which neither central nor local government has yet filled.
Even allowing for large-scale redundancies associated with state-owned enterprise reform in cities, the most striking manifestation of the employment challenge facing China lies in the massive scale of surplus farm labourers, still thought to number between 150 and 200 million people - i.e., between 45 and 60 percent of the farm labour force, or up to a third of the rural labour force. Large-scale farm under-employment is partly a legacy of China 's centrally-planned economy, although declining labour requirements in crop farming since 1978 alongside growing opportunities to engage in higher-income, but less labour-intensive farm activities (e.g., livestock, fish and fruit farming) have exacerbated the scale of agricultural surplus labour.
A distinctive regional dimension attaches to post-1978 rural developments in China . In particular, rural non-agricultural growth – most notably, the development of TVEs – has been geographically concentrated. In 2001, almost half of all TVE employees worked in just ten coastal provinces and municipalities, while a further 36 percent were employed in central regions. The residual TVE labour force – a mere 15 percent of the total – was employed in western China . Stated differently, fewer people living in interior provinces of the country have jobs in profitable, rural non-agricultural - industrial, construction and service - activities, and more depend on low-return farming. Moreover, of those engaged in agriculture, more in central and western regions rely for a living on branches of farming, which offer relatively low incomes. Such factors go far towards explaining the massive scale of inter and intra-regional, and inter- and intra-sectoral, migration that has become so prevalent in China during recent years.

Policy implications
An essential condition of employment maximisation is the maintenance of a buoyant growth momentum. The importance of this is highlighted in official statistics, which show a declining national GDP growth trend since the early 1990s (including stagnating farm output growth alongside a more buoyant rural, non-agricultural performance in recent years). It is essential that the momentum of growth be maintained throughout the rural
sector in order to maximise employment opportunities there. Careful investigations of national and regional employment elasticities should be undertaken in order to maximise such opportunities by implementing the most appropriate structural pattern of growth.
The regional distribution of growth is another important issue. Concealed within national growth trends are very divergent rates of growth between regions. Overall, the story of post-1978 economic growth has been an increasingly strong shift in the economic centre of gravity towards coastal provinces. This has worked to the detriment of employment opportunities in the interior, and especially in western China . Opening up the west is one strategic initiative that seeks to redress the balance, but policies are also required that can offer shorter-term enhanced employment prospects.
Special attention should be given to encourage more productive and profitable farm employment. Low and even declining farm incomes are a major source of economic and social difficulties, which must be addressed. A more equitable burden of taxes and levies on farmers is essential if they are to be retained within the agricultural sector. Further agricultural diversification, attendant on a recognition that the existing high degree of grain self-sufficiency is neither necessary nor desirable, would also help. Efforts should also be intensified to develop a system of agriculture embodying a higher degree of integration between farming, processing and other associated operations – i.e., the development of agro-industry and agribusiness.
Efforts to maximise employment within the rural sector (“leave the soil, but not the village; enter the factory, but not the city” - litu, bu lixiang; jin chang, bu jincheng ) should be strengthened. Such efforts should be directed, in particular, towards regions where the rural, non-agricultural economy remains less developed (i.e., in central and, especially, western China ). They should not only embrace labour-intensive, rural industrial activities, but should also extend to tertiary activities within the countryside. To what extent the widening geographical spread of rural enterprises can maximise the rate of labour absorption is a critical policy issue. Suffice to say, however, that a simple policy recommendation that underdeveloped rural areas in China should follow the pattern of enterprise expansion experienced in more developed regions is contingent on the existence of appropriate income levels, market conditions and labour supply conditions – none of which is automatically guaranteed. Extending the regional spread of rural industrialisation will also help balance demands for capital-deepening and capital-widening.
While acknowledging the economic and social strains of large-scale population movements, migration should be viewed in a positive light. Migration contains the potential to make a significant contribution to rural economic development through skill enhancement, capital formation and employment promotion, based on migrants' remittances and subsequent return to their village communities. In particular, preferential policies towards returnee migrants to the countryside should be maximised.
Implicit in the policy recommendations is the need for appropriate skill provision through the implementation of rural educational and training programmes.

Prospects for cooperation with the ILO
Most of these policy areas offer the potential for fruitful cooperation between the Chinese government and the ILO. The ILO's involvement in formulating and implementing employment creation programmes through the establishment of small and medium-scale enterprises, and its expertise in skill enhancement measures, promise significant pay-offs. Accommodating migration and using it to the advantage of employment is another important area in which cooperation between China , and other countries and international institutions should be encouraged.