China to abolish age-old grain
tax By Peter Morris
The grain
tax, one of China's oldest institutions, is due to be
phased out over the next few years, Premier Wen Jiabao
said recently in a speech to the National People's
Congress (NPC). Records indicate that grain taxes have
been collected for at least 4,000 years, providing the
bulk of imperial China's government revenues. Along with
levies on textiles, compulsory military service and
corvee labor obligations, annual (and sometimes
twice-annually) grain taxes have been one of the core
responsibilities of people living under the yoke of
successive Chinese empires.
In the modern era,
emperors have given way to reformers and technocrats.
Premier Wen, along with President Hu Jintao and other
technocrats representing the Chinese Communist Party's
(CCP's) "fourth generation" of leaders, have singled out
misguided agricultural policies and rural poverty as the
primary factors contributing to China's lopsided
economic development.
Beginning this year, the 8
percent agricultural tax rate will be reduced gradually
until it is scrapped entirely within five years, with
greater reductions for major grain-producing areas and
producers. In addition, except for tobacco, the tax on
special agricultural products will be abolished
altogether as of this year. The move is expected to cut
the financial burden on farmers by US$580 million
annually.
Dumplings and
desertification Farmers, who still comprise the
majority of China's population of 1.3 billion, have for
the most part been left on the sidelines of China's
economic miracle, as city dwellers have reaped the
fruits of the country's booming economy. Rural incomes
have risen less than one-fifth as fast as urban incomes,
and per capita income for farmers in 2003 averaged $317,
compared with $1,000 per year per person for urbanites.
The growing income disparity is of deep concern to
Beijing, as growing unrest in the countryside has the
potential to cause massive instability.
With tax
rates currently at 8.4 percent, many grain farmers are
barely getting by, and hundreds of millions of farmers
have migrated to the cities to work in labor-intensive
industries such as manufacturing and construction,
leaving rural areas deprived of labor. China's one-child
policy and an emphasis on developing cities and towns
have also left farmers in the countryside with little
room to increase their productivity, and farmers are
often poorly compensated for land seizures by local
governments working hand-in-hand with developers.
New industrial zones are often constructed on
prime farmland, an increasingly scarce commodity in
China thanks to desertification, development and
ecological degradation. In fact, a rapid decline in
arable land over the past few years has sparked fears of
severe grain shortages and has led to grain-price
increases. This is particularly worrisome in northern
China, a region that relies heavily on food derived from
grain products as opposed to rice.
Dumplings,
noodles and other grain products are the staple of
Beijing cuisine, and the capital is also on the
frontlines of a hopeless battle against desertification,
whereby devastation of the region's surrounding forest
cover due to pollution and human settlement has caused
Inner Mongolia's arid climate to creep closer and closer
to the capital. In fact, Wen disclosed in his speech
that rapid industrialization has caused arable land to
be reduced from 1.7 billion mu (113.3 million
hectares) in the 1990s to 1.4 billion mu this
year.
Farmers miss out on grain price
hikes In theory, rising prices for grain and
other agricultural goods should benefit farmers. Last
year, the prices of many agricultural products jumped by
more than 10 percent, according to CNN analyst Willy
Wo-Lap Lam. But more often than not, farmers don't enjoy
the benefits of rising prices because the state
monopolizes distribution and marketing, not to mention
the fact that state banks control the vast majority of
capital that farmers depend on for loans. In addition,
more expensive fuels and fertilizers are cutting into
farmers' profits.
Farming experts concede that
peasants' margins are being squeezed by state-owned
distributors and other middlemen, and that far-reaching
structural changes in agrarian distribution and
commercial systems - which are largely state-controlled
- are needed to correct the problem. With farmers having
little say over the price of produce and its
distribution, it is no wonder that hordes of young
people from the countryside are flooding the cities in
search of work.
Both Hu and Wen have gone to
great lengths to craft new policies regarding grain,
land seizures and rural spending, all of which were
outlined at this week's NPC meeting in the form of a
9,000-character document called the "CCP No 1 Document
for 2004", devoted exclusively to improving farmers'
living standards and boosting agricultural production, a
document described by Xinhua news agency as the
government's "warm and magnanimous gift" to the nation's
900 million farmers.
Other measures outlined in
the document are strengthening research in agricultural
science and technology; improving the distribution of
farm products; modernizing agricultural operations;
strengthening emergency animal-epidemic prevention
systems; improving quality standards and systems for
inspecting and testing farm products; implementing the
"action plan for pollution-free food"; offering
vocational training; and finally, providing more
information to farmers who are thinking about a career
change so as to guide the movement of surplus rural
labor. The government also intends to make sure that
rural migrants working on construction projects in the
city are paid in full and on a timely basis.
Too little, too late? The government
will be the first to acknowledge the complexity of the
problem it has on its hands, and analysts are quick to
point out that the tax abolition is in essence futile -
more of a symbolic gesture with little real impact. Even
the state-controlled media have quoted experts
reaffirming the idea that the tax move might be too
late.
The People's Daily, well known to be the
mouthpiece of the CCP, quotes Li Ping, a staff lawyer
with the Rural Development Institute in Seattle, as
saying, "Even if this agricultural tax policy were fully
implemented, the net result would be roughly a reduction
of 40 yuan ($5) per farmer per year. Removing the tax
will barely impact the gaping income disparity between
farmers and urban residents."
Li also pointed
out that even after the tax is completely phased out,
there is no guarantee that farmers would not be slapped
with other fees. Indeed, local officials are notorious
for finding ways to demand arbitrary fees and taxes from
farmers.
The grain tax, said to have been
established as early as the Xia Dynasty around 2200 BC,
may be going to way of the dodo bird, but it has left
behind an ill-fated class of farmers who have few
options but to try their luck in the city or continue
producing grain for the state. And now that Beijing has
launched a campaign to boost grain output to ensure food
security for its huge population, farmers may face new
pressures to remain in the countryside and accept
whatever grain price the state determines is appropriate
in the context of China's quasi-market economy.
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