Not just the so-called “three problems of agriculture” (三农) but as many as seven rural conundrums are explored candidly by a senior government researcher in a report that summarises the findings of recent fieldwork and is published in a new, English language magazine, China Economist.
Seven Issues Directly Affecting Farmers’ Interests is written by the Director of the State Council Development Research Centre’s Rural Economy Department, Han Jun (韩俊), who pulls few punches during a frank discussion of education and health financing, land requisition, rural infrastructure, migration, farm credit, and farmers’ lack of bargaining power.
Education expenses, according to Han, account for 30% of the disposable income of rural families, who pay an average of CNY 1,302 (USD 163) a year to keep a child in primary school, CNY 1,826 for junior middle school, CNY 4,674 for senior middle or vocational school and CNY 10,242 for college. The recent liang mian yi bu (两免一补) policy of waiving fees and providing boarding allowances for impoverished primary school students is “far from enough,” says Han, who argues that nine years of compulsory education should be provided entirely free of charge for all rural children.
He also flags serious problems in government educational financing, following the scrapping of agricultural tax and fees-to-taxes reforms. “Virtually all” budgetary funding is used to pay teachers, Han says, leading to “glaring shortages of money for school maintenance, operation and construction,” such that village schools are rapidly sinking into debt. An investigation conducted last year by the State Development Research Council found that rural schools in two counties of Anhui Province had accumulated debts of CNY 14.2 million (USD 1.8 million) and CNY 18.64 million (USD 2.3 million) respectively. (This echoes China Development Brief’s findings, published last year in our Special Report on Anhui.)
Han also calls for greater state investment in vocational education and skills training, pointing out that this is largely dependent on cost recovery through fees and that most government funds are “used upon the vocational educational of townspeople . . . [with] little left for farmers anxious to receive skills training.” In 2004, he notes, 71.8% of migrant rural labourers had not received any form of job training, effectively limiting their prospects to unskilled work. CNY 250 million (USD 31.2 million) was allocated in 2004 to a government-sponsored ‘Sunshine Project’ to train migrants but this, says Han, reached only 2.4% of 102 million farmers working away from home.
Health security still “a long way off”
Han offers faint praise for new cooperative medical insurance schemes that, he says, now reach three quarters of the rural population in 333 counties (but only 9% of China’s total, rural population). The schemes, Han reports, have “alleviated the financial burden upon the patients’ families to a certain extent,” but are still “a long way off solving the problem of illness-induced poverty among rural residents.”
In 2004, Han notes, farmers paid an average of CNY 131 for medical bills, but the average cost of treatment of “major disease” was CNY 7,000, “a sum that a rural family can work an entire year to earn.” A survey of 2,000 rural families last year showed that 70% face medical bills that on average account for 10% of disposable income.
Wasteful allocation and misappropriation
Whilst recognising central government determination to direct more resources to the countryside, Han identifies poor inter-departmental coordination and misappropriation of funds as major policy obstacles.
“Available funds are stretched too thin because too many financial channels are distributing it [sic],” he writes. “At county level alone, more than a dozen departments can allocate finances [for rural development projects] . . . [but] the State Development Planning Commission, the Ministry of Science and Technology, the Ministry of Finance and the agriculture administrative authorities have failed to form a framework with which to coordinate effectively . . . With so many departments mindful of their own affairs, the funds for rural development are either scattered into insignificant amounts or forced to overlap.”
Problems of inefficiency are compounded by deliberate diversion of funds. “The selection of projects, the payment to be provided for them, and their supervision and administration are often all carried out by the same department . . . leaving plenty of loopholes for the violation of rules and regulations and breaches of discipline.” An investigation of two counties in Western provinces, says Han, found that over a seven year period one had re-allocated CNY 34.58 million (USD 4.3 million) from funds designated for agriculture to pay salaries of government staff. “The situation in the other county was even worse, with twenty million yuan being misappropriated annually.”
Han adds that “in dispensing financial support, the government tends to favour agricultural ‘arteries’ over ‘capillary vessels.’” For example, “even if the central or provincial government has built a giant water conservancy project or a major road right on the farmers’ doorsteps, it cannot benefit the farmers because ‘the last kilometre’ has yet to be built.” Han calls for a “standard, highly efficient framework” to remedy this and drive investment down to the grassroots.
Migrants make good money—for other people
Han goes on to discuss the situation of migrant “farmer-workers” who account for 68%, 80% and 50% respectively of China’s total labour force in manufacturing, construction and service industries. Last year’s survey of 2,000 families, he reports, found that 785 had at least one member working away from home, and 285 had two members working away. According to the survey they earn an average of CNY 913 (USD 114) per month, and remit home an average of CNY 5,368 (USD 671) per year.
However, Han quotes a survey of the Pearl River Delta area as showing that “for more than a decade, pay rises have largely remained elusive for farmer-workers, and they earn roughly one quarter what city workers make for doing the same work.” Furthermore, he reports that a Ministry of Labour and Social Security survey, comparing China’s manufacturing industry with 20 other countries, found that workers’ wages generally account for 35%-50% of value added in developed country manufacturing, and 20%-35% in other countries; but that in China workers’ earn only 9.3% of the value added. (By the standards of orthodox Marxist economics, this would appear to make Chinese manufacturing workers the most exploited in the world.)
Also touching on the problem of unpaid wages, Han reports that “in 2004, construction firms in Beijing were behind in payments totalling 3 billion yuan to 700,000 farmer-workers, which averages at [sic] more than 4,000 yuan per worker.” In the same year, a State Statistical Bureau survey of 4,473 migrants found that 10% were owed wages, averaging CNY 1,754 each. As well as urging full and prompt payment of wages in arrears, Han concludes that “It is imperative to reform the urban-rural dual economic setup, to treat farmer-workers fairly, to make urban utilities and services available to them, to allow and encourage them to settle down in cities, and to help them complete their change of identity.”
On the subject of compulsory purchase of farmland for conversion to industrial or residential use, Han concludes that “‘Exacting wealth from land’ has become a major tool of some local governments in building up their financial muscle and raising funds for urban development. It has become a new approach towards ‘making the countryside nurture the cities.’” By offering farmers compensation well below the market values of their land, he says, local governments are able to net a 60%-70% profit on projects that involve land requisition; while 40-50 million farmers have lost all or part of their land in the course of such projects. Han argues for “stern limitations” on land requisitions, and compensation packages based on market land values.
Credit squeeze, associational freeze
Farmers who remain on the land continue to experience difficulty in obtaining credit, according to the Development Research Centre’s 2,000-family survey. Of those who had borrowed money, 58% obtained loans from family and friends and only 37% from Rural Credit Cooperatives (RCCs), which were designed to provide smallholder finance; and 58.4% of farmers taking out loans used them to finance consumption rather than productive investment. RCCs, says Han, are reluctant to lend more than CNY 3,000 (USD 375) to farm households, and this severely curtails the prospects for productive investment and diversification.
He calls for further efforts to reform RCCs, policies to encourage development of small-scale rural financial institutions, and loosening of controls over non-government funds entering the finance market, adding that the Agricultural Bank of China “should cease alienating itself from farmers . . . and must step up its support for agriculture and the rural economy.”
Likewise, Han argues that farmers should be encouraged to form cooperative economic associations to provide support with technology, information, processing and marketing. A 2004 investigation of 150 farmers’ associations in Sichuan, Zhejiang and Anhui, he reveals, found that they are “small in size and lack growth speed and sound governance.” He calls for enabling policy and independent legal status for farmers’ organisations, warning that “It is unwise to cut their feet to fit the shoes of the available legislation.”
Cold comfort for the new socialist farm
If Han Jun’s analysis suggests a tough job ahead in creating the “new socialist countryside” that the Communist leadership has promised, the leadership might take some comfort from another article published in the same, May 2006, edition of China Economist.
In Rural Areas Need More Public Product Investment, Luo Renfu (罗任福) and Zhang Linxiu (张林秀) of the Chinese Academy of Sciences, writing with Scott Rozelle and Liu Chengfang (刘承芳) of the University of California at Davis, report their own survey of 2,459 villages in six provinces. They found that in the period 1997-2003 there was in fact “a relatively high degree of investment in rural areas,” with an average of 3.75 village-level investment projects per village and a mean value of CNY 108,000 per project. The most common projects, accounting for 74.7% of total investment, were (in descending order): building or upgrading roads and bridges; re-foresting sloping land in compliance with the ‘grain for green’ policy; school construction; irrigation and drainage works; drinking water supplies.
The authors conclude that “China’s investment targets are becoming increasingly focused on public goods,” in contrast to the previous emphasis on setting up and running money-making (or loss-making) enterprises. When interviewed about the purpose of investment projects, 41% of village leaders said they were undertaken “to improve the quality of lives of the villagers” and a further 16% said they were aiming “to improve the environment.” Village government, it would appear, is becoming less driven by narrow, income-generation goals.
However, much of the investment in these projects comes from farmers themselves. Without counting their labour contribution, villagers contributed 47% of the total finance for the projects. Of more than 7,000 projects reported, 18% were funded only by the village, 36% were funded only by higher administrative levels (township and above), and 46% were jointly funded. Poorer villages attracted a higher proportion of government funded projects, whilst villages that were not poor were able to afford, and initiated, a higher proportion of projects paid for by villagers themselves.
New magazine on the shelf
Launched in March, China Economist is a bi-monthly magazine sponsored by the Chinese Academy of Social Sciences (CASS), writes Tina Qian. It is jointly produced by the Academy’s Industrial Economics Research Institute (工业经济研究所) and China Business (中国经营报社), a weekly newspaper that the Institute has produced since 1985.
The new product aims to be a quality English language journal with contributions from Chinese scholars, economists and management scientists, translated into English by a team mainly made up of PhD students.
Professor Chen Jiagui (陈佳贵), the Vice President of CASS, serves as Director of the editorial board, and Mr. Zhu Yinghuang (朱瑛璜), former Editor-in-chief of the China Daily, serves as translation consultant.
The magazine is currently published by the Economy & Management Publishing House. Its first two issues were officially published as “books” as the magazine has not yet secured a magazine publishing licence from the General Administration of Media and Publication—but this formality will soon be settled, according to Zhao Qi (赵琪), Director of the Publishing at China Business, which offers help in production, advertising and marketing.
