Rural China: Too little, too
late By Swati Lodh Kundu
BANGALORE - Using the annual session of
the National People's Congress (NPC) in March as
its stage, the ruling Chinese Communist Party with
much fanfare launched a package of rural policies
with the expressed aim of building a "new
socialist countryside".
This marks a shift
of "epoch-making significance" if one believes the
rhetoric of Premier Wen Jiabao in his address to
China's parliament. In fact, making the rural
crisis a "priority" has been a theme of official
propaganda since Wen, President Hu Jintao, and the
rest of the fourth-generation leaders took the
helm in early 2003.
And why not? The top
Chinese leadership is clearly alarmed by an
upsurge in peasant protests unprecedented in
China's post-1949 history. Last year, 87,000 "mass
incidents" ripped across
the
country. Remote towns such as Huaxi, Taishi and
Shanwei broke into the news and became symbols of
China's "new rebellious countryside".
At
Huaxi, an industrial park in wealthy Zhejiang
province, 20,000 peasants and workers demanding
the closure of chemical factories fought and
disarmed a force of about 3,000 police. The
Washington Post reported, "By the end of the day,
high-ranking officials had fled in their black
sedans, and hundreds of policemen had scattered in
panic while farmers destroyed their vehicles."
In Shanwei, in the industrial powerhouse
of Guangdong province, a similar battle against
the construction of a power station on
requisitioned land led to one of the worst
civilian massacres since 1989, with as many as 30
locals shot dead by paramilitary police. It is
these and countless other large-scale protests
against land seizures, official corruption and
polluting factories, mirrored by growing unrest in
the cities and on the factory floor, that have
produced the latest shift in policy.
In
June 2005, government-hired thugs in Dingzhou,
Hebei province, killed at least six peasants in a
battle to enforce a claim on a piece of farmland
by a state-owned power plant. The following month,
hundreds of villagers in Taishi in Guangdong
launched a campaign to oust their village head
whom they accused of misappropriating money from
land sales, leading to violent clashes. In another
Guangdong village, Panlong, a girl was killed in
January when police clashed with farmers.
After three decades of pro-capitalist
reform, rural China faces a catastrophe: massive
environmental degradation, falling living
standards and a creeping takeover of villages by
clans and gangsters. The income gap between urban
and rural Chinese is officially 3:1, one of the
largest disparities anywhere in the world. But
Chinese Academy of Social Studies calculations put
the difference at 7:1 when such factors as social
services, health care and education are taken into
account.
At a party meeting last December,
Wen Jiabao, reflecting the leadership's growing
anxiety over such unrest, issued a warning against
making "historic errors" over rural land. The
protests suggest that the party's strategies for
taming rural unrest have failed.
Correspondent Howard W French commented in
the International Herald Tribune, "We are
routinely invited to ooh and ah over the growth of
[China's] gross domestic product, its industrial
prowess and the proliferation of skyscrapers in
the big cities. But the predominant reality is
less often seen. To a great extent, the rural
world, where 60% of the people in China live,
consists of blighted land, a development
nightmare, a modern-day dust bowl for which one
has trouble imagining any near-term fix."
The problem goes back to Mao Zedong. One
of the first things he did on taking power in 1949
was to seize land from landowners (killing
thousands of them in the process) and redistribute
it to peasants. In the 1950s he took the land away
from them in turn and put it under the collective
ownership of communes. The communes were
dismantled in the early 1980s, a few years after
Mao's death. Peasants were allocated plots to farm
as they wished, but ownership remained collective.
Since the 1990s, leases of 30 years (but in
practice often less) have been granted on these
tiny plots, but peasants have not been able to use
the land as collateral for loans or to sell it.
They can rent it out, but this often involves
paying a fee to the village administration.
So, whereas trade in land and property has
become an important engine of growth in urban
China (where residential leases run for 70 years
and others for 40 or 50), farmers have been cut
out of this boom. Li Changping, a former township
party chief who has become a prominent critic of
the government's rural policy, says that by
limiting leases to 30 years, the state is in
effect asserting its control of the land over the
village collective. This reinforces local
governments' belief that land is theirs to grab.
China's rural-land problem is exacerbated
by a dysfunctional system of taxation that leaves
many local governments unable to pay for basic
services such as health care and education. China
is among the most decentralized countries in the
world as far as paying for local services is
concerned ("the central government invites the
guests, the local government pays the bill", goes
a popular saying). A half-baked attempt at reform
in 1994 has favored wealthier regions.
Abolishing rural taxes without putting in
place an alternative way of funding public
services has simply made the problem worse. Land
has become an even more vital resource for local
governments, which either hand it over for little
or nothing to attract industry or sell it at high
prices to property developers. They also use
requisitioned land as collateral for bank loans,
adding to the potential woes of a banking system
in which risk is poorly understood. Total debts of
township and village governments alone may amount
to well over 1 trillion yuan (US$125 billion), or
more than 5% of gross domestic product (GDP). To
put things in perspective, Argentina's total
external debt is $119 billion.
Indeed,
many taxes levied in rural areas are technically
illegal, but then many local governments are
bankrupt. This is a legacy of the decentralization
of local-government finances in the 1980s under
Deng Xiaoping's pro-capitalist reforms. This helps
explain the rapacious seizure of farmland by local
officials in collusion with property speculators,
the single biggest trigger of peasant protests.
Land sales are now the primary source of income
for many local governments as well as a lucrative
sideline for mafia-type local party bosses. Every
year 200,000 hectares of farmland is turned into
roads, factories, shopping malls and residential
areas.
More than 50 million farmers have
been displaced by such land grabs with little or
no compensation, according to a study by the
United Nations Development Program. These landless
peasants have been pushed on to the bottom rung of
China's poverty ladder. Many are among the nearly
200 million rural migrants who have fled to
coastal cities to join the "sweatshop proletariat"
working under inhuman conditions mostly for the
benefit of foreign capitalists.
When land
is seized, peasants are compensated for its
agricultural value, which according to some
Chinese scholars averages about one-tenth of its
market value. Village administrations take a cut,
so the amount received by the peasants is often
far less. By contrast, in the cities the
privatization of housing since the late 1990s has
created a middle class that is using its property
as collateral to borrow. Trading property has
become a big source of urban wealth. Of China's 50
richest people, about half owe their fortunes in
large part to property deals, according to Rupert
Hoogewerf, the author of China's first rich list.
In fact, it should be realized that
China's shift to capitalism started on the land.
Apart from a short-lived lift in the early 1980s,
when Deng disbanded the system of collective
farming, rural living standards have largely
stagnated. This "blip" of higher incomes was due
to a variety of factors that proved to be
transitory, although at the time it was hailed as
proof of the superiority of the market system.
International Forum on Globalization
fellow Dale Wen points out, "The official media
still attribute the rural boom period (1978-84) to
the de-collectivization process. Yet more than
two-thirds of the gains were achieved before 1982,
the year de-collectivization was carried out on a
large scale. Other factors, such as rising grain
prices and the use of chemical fertilizers,
contributed much more to a short-lived success."
Deng and the pro-capitalist wing of the
party demonized collective farming as an example
of Mao Zedong's egalitarian ideals that were
"holding back" China's development. In fact, many
communes were efficient by the standards of the
day. But reflecting their double role as
instruments of control, they were often
characterized by monstrous levels of
centralization and bureaucracy. The privatization
of farming under Deng's reforms, however, made it
more difficult to achieve economies of scale. The
main beneficiaries were the former top layer of
administrators under the collective system, which
emerged as managers or owners of larger private
farms and rural enterprises.
Many small
farms, on the other hand, were doomed to
technological regression. Unable to pool
resources, they could no longer afford
mechanization. Labor productivity plummeted,
although this process was concealed by the use of
greater amounts of labor, including children. As
more labor was needed to run household farms,
other - collective - tasks such as repairing
infrastructure were neglected. This has resulted
in a vicious circle as farmers pump more and more
chemicals into fields to compensate for soil
degradation, water shortages and other problems.
On a per-hectare basis, China uses three
times the global average of fertilizers. This, in
conjunction with waterborne and airborne
industrial pollutants, has created an ecological
disaster of monumental proportions. Acid rain
falls on a third of the country, while air
pollution, in addition to killing an estimated
400,000 people a year, also reduces crop yields.
Today, 40% of China's arable land is degraded and
fully one-fifth is contaminated by heavy metals
such as cadmium, lead and arsenic. Now the Chinese
regime is paying the political price. There has
been an 11-fold increase in environmental protests
during the past decade, with one-third of these,
according to an official report, turning violent.
These problems dwarf the modest measures
embodied in the "new socialist countryside" policy
- of tax cuts, subsidies and new funds for rural
infrastructure, schools and health care. The
policy is designed to underpin long-term policies
to industrialize, urbanize and enrich the rural
areas that remain home to about two-thirds of
China's 1.3 billion people.
Closer
inspection of the package, however, reveals that
it is neither new nor socialist, nor even
Keynesian. In line with the "prudent" fiscal
course announced three years ago, a return to more
or less balanced budgets after several years of
expansive fiscal policies in the aftermath of the
1997 Asian crisis, the government's budget deficit
for 2006 is to be cut by 1.7%. As many
commentators have pointed out, the 14% increase in
spending on agriculture, to 339.7 billion yuan
($42 billion), will not go far among 745 million
peasants. In fact, while rural spending is up on
last year's level, at 8.9% of total government
expenditure it is down from the 9.2% share in
2004. In reality, it is argued that four times as
much money is needed.
As with the rest of
the Five-Year Plan for 2006-10, the "new" farm
policy allows for "greater play for market forces"
and aims to "deepen institutional reform at
township level and financial reform at county and
township levels" (read: privatization). One
element of the new policy is to attract foreign
banks into the rural financial sector.
In
an editorial, the Financial Times calls on the
Chinese regime to "define a long-term social
welfare strategy and fund it more generously".
While calling Beijing's farm policy commendable,
the Times warns that it "barely dents the
problem".
These comments reflect a dawning
realization in the outside world that China's
so-called economic miracle, upon which the global
economic system is increasingly dependent, is in a
serious mess. At the same time, capitalist
commentators argue for more and faster reform,
including steps to privatize farmland, which since
1949 has been owned by the state. This is also a
cause celebre within the overtly
neo-liberal wing of the Chinese regime, although
the policy presented to the NPC meeting makes a
more muted commitment to introduce a "market
mechanism" for setting the value of farmland.
But Wen's top rural adviser, Chen Xiwen,
gave the game away when he told Xinhua:
"Eventually we have to steadily reform the
land-acquisition system itself. But the reform
would progress carefully, and state monopoly will
exist for the time being, before proper control
measures are designed to avoid large-scale losses
of land."
The abolition of agricultural
taxes (on crop production) - "after 2,600 years",
as the regime keeps reiterating - has largely
already been implemented. According to the
Economist Intelligence Unit, the total amount of
new money on offer from Beijing works out at about
265 yuan ($33) for each rural resident, a sum it
describes as "underwhelming".
Also, as
part of an ambitious plan to build "socialist new
villages", the aim is to provide safe drinking
water to 100 million people in rural areas over
the next five years. If it meets the target,
another 200 million people will still be drinking
unsafe water, according to government estimates.
Such numbers reflect the mammoth task facing the
government in trying to spread the benefits of
rapid economic development beyond the glittering
cities of the east and south. Indeed, after 25
years of reforms first promoted by Deng Xiaoping,
millions of affluent Chinese are living in
comparative luxury in the large cities.
Now the government is trying to address
some of the problems that resulted from the uneasy
alliance between the party and large Chinese and
foreign businesses.
"Some nouveaux
riches have the monopoly on certain resources
by utilizing their relationships" with party and
government officials, according to Hu Biliang, an
economist with the Chinese Academy of Social
Sciences.
Unfair market competition has
made certain people use illegal means to amass
wealth while others become poorer. Income and
wealth gaps are highly visible even in the most
developed cities, where migrant laborers in
patched cotton push tricycles laden with furniture
or recycled cardboard past expensively dressed
business executives driving luxury cars. In many
small towns of central and western China, it is
like going back to the cities of 25 years ago.
Poor education, sanitation, medical care, social
security, transportation and infrastructure all
add to the inequalities between rural and urban
residents.
To what extent the new measures
will be carried out on the ground remains to be
seen. Beijing's control over the provinces and
localities can only be described as partial. All
told there are 6 million government officials
whose salaries, limousines and banqueting claim
about a quarter of the government's budget - more
than twice the sum earmarked for the "new
socialist countryside".
At the local level
there is a close and growing interaction among
government organs, capitalists and foreign
investors that causes countless conflicts of
interest between them and the central government.
Given the chronic culture of corruption within the
Chinese state, the question is, how much of the
extra funding and concessions announced by Beijing
will actually reach rural communities?
Swati Lodh Kundu is a freelance
writer based in Bangalore, India. She has a
master's degree in economics from the University
of Calcutta.
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