Farm reform will force China to grow
By Kent Ewing
HONG KONG - While the rest of the world is fixated on the biggest financial
meltdown since the Great Depression of last century, it may seem odd that the
highest decision-making body of the Chinese Communist Party (CCP) has been
holed up for four days talking about farmers. There is, however, an important
connection.
The collapse of the global financial system has made reform of China's land-use
regime - a hot-button issue since former paramount leader Deng Xiaoping first
began pushing the country toward a market economy more than 30 years ago - all
the more urgent.
With Chinese exports expected to slow dramatically as the world
economy contracts, the country's leaders want to boost domestic consumption by
spreading China's newfound wealth beyond the cities - where it has created
breathtaking modern architecture and a new class of millionaires - to the
still-impoverished countryside, where two-thirds of the population continues to
live. At the same time, increasing farmers' incomes could go a long way toward
quelling rising social unrest often attributable to rural land disputes and the
massive wealth gap between rural and urban China.
According to the National Bureau of Statistics (NBS), the country's total
population was 1.32 billion at the end of last year. Of the total, the rural
population was 727.5 million, accounting for more than 55%. This percentage
could be much higher if the nearly 200 million rural migrants working in cities
were taken into account. But consumption of farmers was small compared to their
large population.
The whole country's retail sales, a measurement of consumption, totaled 8.92
trillion yuan ( US$1.3 trillion) in 2007, up 16.8 % from the previous year.
Retail sales in cities were up 17.2% to 6.04 trillion yuan, accounting for
67.7% of the total, while retail in rural areas was up 15.8% to 2.88 trillion
yuan, or 32.3% of the total. Not only was the total sum of consumption much
smaller, but growth of consumption in rural areas was also 1.4 percentage
points slower than that in cities.
This is mainly because farmers made much less income than urban residents and
growth of farmers' income was also much slower. Figures from the NBS show that
an average farmer's income was 4,140 yuan (US$606) in 2007, up 9.5% from the
previous year. By comparison, an average urban resident's income was 13,786
yuan, up 12.2%. The average income in cities was 3.3 times that of farmers,
though a farmer's income does not include grain and other foodstuffs grown for
family consumption.
The current market for consumer goods in Chinese cities is more or less
saturated. So, the potential for growth of domestic consumption is in the
countryside. The crux of boosting rural consumption is to boost farmers'
income.
To this goal, the general aim of new rural reforms set by the just-concluded
party plenum is to double farmers' income by 2020 from the current level.
Among others, a major policy principle for achieving this goal is to give
farmers more freedom in the disposal of their farmland. This is, in fact, meant
to allow farmers to capitalize on farmland.
The announcement that the leadership will adopt a new rural growth policy -
made on Sunday in Beijing at the conclusion of the third plenary session of the
party's 17th Central Committee - is potentially a game-changer.
The communique of the party plenum was short on details, as a decision on
detailed reform policies, approved by the party meeting, has yet to be
publicized. But state media reports and comments by scholars and other analysts
have said that, for the first time, farmers will be allowed to freely dispose
land-use rights, including selling them or using them as collateral to borrow
loans from banks. In other words, a farmer will be able to capitalize on the
farmland he has contracted from the state on which he has hitherto been
restricted to farm.
According to NBS, the total area of farmland by the end of last year was 123.73
million hectares. On capitalization, farmers could have huge funds at their
disposal.
For China, this new policy may be a double-edged sword, some Chinese scholars
have warned.
On the positive side, it could speed up industrialization and mechanization of
agricultural production as small pieces of farmland currently contracted by
households could be merged into bigger farms to boost efficiency and
productivity.
In this regard, Xu Xianglin, an economics professor with the Central Party
School said at a Xinhua online forum that the major goal of the party's new
policy was to achieve "sizeable" production in agriculture and facilitate
urbanization. "A farmer who sells his farmland will no longer be a farmer," he
said.
Therefore, there are potential risks, a sociology researcher with the Chinese
Academy of Social Sciences told Asia Times Online. "Some farmers may be tempted
to sell their farmland to get some cash in hand. But then what can they do?
They could move to start some small businesses or move to live and work in
cities. What about if they fail in running their businesses and cannot find
jobs in cities?" the researcher asked.
In his view, to implement the new land reform, China has to make changes in
other social systems. For instance, China needs to reform its household
registration system so rural migrants in cities can be accepted as urban
residents proper and enjoy the same treatment.
Also, the country must extend its social security and medical insurance
networks to cover farmers.
"Only when farmers can enjoy equal political and social status as urban
citizens, can there be true urbanization to accommodate peasants who give up
their farmland," the researcher said. If such coordination measures are not
taken, the growing number of landless farmers may eventually become a threat to
the country's political and social stability.
The Central Committee meeting, which was chaired by president and Communist
Party general secretary Hu Jintao and attended by more than 300 committee
members, set targets that would eliminate poverty and double per capita income
in the countryside by 2020. Members also vowed to increase government spending
in rural areas on education, medical care and a range of social services.
In a commentary on the plenary session, Xinhua stated: "The global credit
crisis freezing up the world's finances may be a blessing in disguise for China
as it aims to modify its economic structure after three decades of breakneck
growth."
In the end, Beijing hopes that as demand for Chinese exports falls in the
global economic downturn, an economically liberated countryside will be able to
boost domestic consumption, making up at least some of the deficit.
But tight restrictions will remain on the sale of farmland as the country
strives to maintain a minimum of 120 million hectares of arable land to assure
agricultural self-sufficiency. As Xu put it, the policy is more aimed at
modernizing agricultural production than privatizing farmland.
The plan could work, but the Chinese leadership will have to seriously tackle
corruption. The committee’s communique skirted the issue of rampant official
corruption at the local level, which is responsible for countless illegal land
seizures from farmers. And, even when these seizures are technically legal,
compensation is so poor that farmers are left feeling cheated and angry.
Kent Ewing is a Hong Kong-based teacher and writer. He can be reached at
kewing@hkis.edu.hk.
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