Ongoing Rural Issues and Responses

In terms of legitimacy, one of the CCP’s biggest headaches has been rural restructuring. There was pandemonium as the CCP decentralised power. The local governments that assumed control (whose main role had been economic development) had a tendency to be stingy with resources and the cadres’ formerly pastoral roles turned coercive. This form of government was given names like ‘bureaucratic capitalism’, ‘corporatist’ and ‘clientalist’. It was all about attracting business locally and the additional decollectivist role was now to enforce the ‘three state quotas’: grain procurement, family planning and local taxes. This stingy environment led to a serious squeeze in poor areas on expenditure on education, healthcare and other important areas that was untenable in terms of legitimacy. ‘Extra’ charges (but never on business that was so courted) designed to ‘ease the squeeze’ were no more popular.

The township of Qipan in Hubei provides an interest case study of the issues faced and results:

Location - Hubei, mid-Yangzi basin;

Main Agricultural Activity - Rice paddy production;

Average Family Farm Size - 10 mu (1.65 acres);

1998 Average Income - 1,910 Yuan per capita;

1999 Value of Rice Yield - Y360/mu;

Inputs (seed, fertilizer, etc.) - Y170/mu;

Government Taxes and Charges - Y230/mu;

Net Loss - Y40/mu;

School Fees - Y600/year primary,

Y1,200/year junior high;

Health - 75% of the population can’t afford to see a doctor (no medical insurance possible);

Result - New Year 2000 approximately 25,000 (out of 39,000 population) or 75% (85% of the labour force) upped stumps together and abandoned the village to seek work in urban areas.

This illustrates the crisis in agriculture in many places rather neatly: the cost of inputs was too high; tax and fee burdens were heavy; the population to land ration was too high (farming was inefficient) and returns for agricultural products were too low. It was simply uneconomical in many places that were being farmed to farm small farms (especially when the city cousins were doing relatively so well).

It must be said however that inroads had been made into rural poverty. In the period 1990 to 2004 the percentage of the rural population living in poverty dropped in UN terms (given a Y2,900 adjusted poverty line as at 2004) from over 30% to 10% and in Chinese terms (an adjusted 2004 Y668 poverty line) from around 10% to around 3%. Nevertheless (for virtually the first time not being the result of famine) from 1995 the rural population fell (from around 850 million to around 750 million in 2004 while the overall population rose from 1.2 billion to 1.3 billion) as migration to cities intensified.

Within the countryside, as agricultural employment declined from around 1990 (to just over 300 million in 2004 from a peak of over 350 million in 1990) the slack was taken up somewhat by the growth of employment in the TVE sector (which had nearly 150 million rural employees by 2004 - up from around 30 million in 1990). A new ‘floating’ rural labour force now approached a sizeable 150 million extra people available (which had virtually not existed at all when Deng first came to power).

“Floating” was at first a pejorative used by the party because this group was unemployed and didn’t have the official hukou that would permit them to legally look for employment and accommodation in any city (they were not anchored). They were still officially in the countryside but were actually likely in the cities seeking employment in unregulated markets. Later the CCP was more accepting of (and less scathing in their remarks concerning) this group as it proved to be an economically useful and needed ‘reserve force’ of labour for the cities. This most vulnerable floating group typically carried their lives around in bags to the job queues. In the cities they were: numerous and poor so easily replaced; unrepresented so easily exploited; lacking the urban hukou so accorded few urban rights; and considered less civilised and so treated as second class citizens generally.

The CCP came up with a statement of the issues as part of attempting to find the solution to all of the above. They were referred to as “the three rural problems” or “the three problems (san neng - 三農)”. Here they are:

1) Agriculture - stagnation in productivity and efficiency, declining

incomes, high tax burden;

2) Countryside - surplus labour, land management and local governance

(village elections);

3) Peasants - low ‘quality’, poor levels of education and skills, health,

etc.

The campaign the CCP came up with was called “Building a New Socialist Countryside”. More private and public cooperation would be allowed.

The CCP reduced taxes and remarkably completely abolishing the State Agricultural Tax in 2005 for the first time in literally thousands of years. These were central measures that left local taxes in place for the time being. The central state also dramatically increased its infrastructure (e.g. water, roads and power) investment and spending in the health, education and welfare sectors. This was made possible by a major growth dividend. The local sector was streamlined and this eventually also led to reduced local taxes. Farmers were also giving new access to training in business practices and new technology.

After 1978 and Decollectivisation, land usage had become a problem as the average eastern Chinese family farm was allocated a mere ¼ acre block (800m²) – the size of a typical Sydney suburban block. There were now literally millions of tiny family farms in China. This was still inefficient (though productivity had been improved by the private system) so private shareholder cooperatives and companies were now permitted to be formed. People were also now allowed again to rent out their farms enabling others to increase their effective holdings and achieve better scale. To keep employment levels up, the government encouraged many farmers to shift to growing more labour intensive crops (such as fruit and vegetable for the Japanese market and food processing). The idea here was that China had an international comparative advantage in the cheapness of its labour (relative to the cheapness of its land) and just then also had a convenient abundance of unused labour in the countryside.

The government also noted that the price of land for agriculture was inflated by competition in its use for industrialisation, urbanisation and tourism (e.g. for resorts and golf clubs) and that lack of fair compensation to farmers for forgone land had produced the majority of all protests and protest movements directed against government policy. So this was virtually the main problem for CCP legitimacy in China. This farmers’ rights issue also raises issues of democracy that I’ll examine in the next post where I’ll also see what was in the CCP’s mind in that regard in the cities.