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China’s rural time bomb

China is experiencing an upsurge in peasant protests unprecedented in its post-1949 history. But Beijing’s recent ‘shift’ on farm policies will not quell China’s ‘new rebellious countryside’. VINCENT KOLO reports.

TO GREAT FANFARE, using the annual ten-day gathering of the National People’s Congress as their stage, the ruling Chinese Communist Party (CCP) have 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 pseudo-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 2003. But despite Hu and Wen making a point of touring villages to ‘listen to the masses’, little of substance has changed.

The top leadership are clearly alarmed by an upsurge in peasant protests unprecedented in China’s post-1949 history. Last year an incredible 87,000 ‘mass incidents’ ripped across the country. Flashpoints like Huaxi, Taishi and Shanwei became world news as 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 around 3,000 policemen. As 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, located 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 policy statements.

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 incomes gap between urban and rural Chinese is officially three-to-one, one of the largest disparities anywhere in the world. But Chinese Academy of Social Studies calculations put the difference at seven-to-one when factors like social services, healthcare and education are taken into account.

As correspondent, Howard W French, commented in the International Herald Tribune (8 March 2006), "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".

Drop in the ocean

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 healthcare. Under closer inspection the package is not ‘new’, ‘socialist’, nor even Keynesian. In line with the ‘prudent’ fiscal course announced three years ago, a return to more or less balanced budgets following 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 339.7bn yuan ($42bn), 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. Liberal commentator and sometime adviser to the CCP regime, Lin Yifu, argues that four times more 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: privatisation). One element of the new policy is to attract foreign banks into the rural financial sector. Business journals like the Financial Times do not generally clamour for more public spending on health and social services, yet in an editorial (9 March 2006), the FT calls upon the Chinese regime to "define a long-term social welfare strategy and fund it more generously". While calling Beijing’s farm policy "commendable" the FT warns that it "barely dents the problem".

These comments reflect a dawning realisation 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 privatise farmland, which since 1949 has been owned by the state. This is also a cause célèbre 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 telling us – has largely already been implemented. According to the Economist Intelligence Unit the total amount of new money on offer from Beijing works out at around 265 yuan (33 dollars) for each rural resident, a sum it describes as ‘underwhelming’.

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 six million government officials whose salaries, limousines and banqueting claim around a quarter of the government’s budget – more than twice the sum earmarked for the ‘new socialist countryside’. At local level there is a close and growing interaction between government organs, capitalists and foreign investors that causes countless conflicts of interest between them and the centre. Given the chronic culture of corruption within the Chinese state, how much of the extra funding and concessions announced by Beijing will actually reach rural communities?

Speaking at the National People’s Congress, Wen Jiabao himself acknowledged the very real risk of "the re-emergence of random charging of farmers under various pretexts". Take school fees, for example. There have been countless cases recently where central government orders to reduce fees have been ignored. "Sometimes, policies of central government just cannot go beyond Zhongnanhai [the leadership compound in Beijing]", one vice minister told the Hong Kong Standard. China, as this newspaper remarked, "is no longer highly centralised politically despite the continuation of the communist dictatorship". (The Standard, 28 November 2005).

Many taxes levied in rural areas are technically ‘illegal’, but then many local governments are bankrupt. This is a legacy of the decentralisation of local government finances in the 1980s under Deng Xiaoping’s pro-capitalist ‘reforms’. County level administrations today have debts totalling $125bn, which are not included in the overall government debt statistics. To get some perspective on this, Argentina’s total external debt is $119bn.

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 are turned into roads, factories, shopping malls and residential areas. Over 50 million farmers have been displaced by such land grabs with little or no compensation, according to a study by the United Nations Development Programme. These landless peasants have been pushed onto 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.

Deng’s legacy

DURING ITS STALINIST or ‘Maoist’ phase, the regime in China did not just rule with dictatorial methods, it also delivered remarkable social gains for the mass of the population. Socialists always opposed the former – the stranglehold of an unelected bureaucracy over the planned economy – but defended and sought to deepen and democratise the latter. Today, following the break-up and privatisation of the planned economy, all that remains is the iron fist.

China’s healthcare system was held up as a model by the World Health Organisation (WHO) in the 1960s and 70s. In the first three decades after the 1949 revolution, average life expectancy rose from 35 to 67 years. China was the first nation in the ‘Third World’ to wipe out smallpox and polio. The network of ‘barefoot doctors’ and township clinics that rested on the collective farms or ‘communes’ delivered basic healthcare to practically the entire rural population. But this system has been smashed. In 1975, for example, there were 14 times as many rural nurses as there are today.

Infant mortality rates are now on the rise in many rural communities especially in the poor western provinces where ethnic minorities predominate, while communicable diseases such as hepatitis and tuberculosis are rampant. China is now second only to India in cases of tuberculosis – 1.45 million new infections a year and 130,000 deaths. The most recent WHO survey on access to healthcare puts China fourth from the bottom of 191 countries, behind even Iraq. Astonishingly, and without pointing the finger of blame at the country’s ‘market reforms’, even the Financial Times now bemoans "the disorganisation, poor management and structural decay besetting China’s once widely admired health and mass education systems". (Editorial, 9 March 2006)

Paradoxically, the social gains made during the planned economy period help explain how the CCP regime has – until now – succeeded in steering China towards capitalism. Author Dale Wen makes the following case:

"Why is the Chinese resistance against this kind of reform only rising now, much later than in many other countries? Two important reasons are: 1) the state’s accumulation of considerable political capital in the pre-reform years; and 2) the successful disguise under which the reform was carried out". (China Copes with Globalization, December 2005).

Deng, the architect of China’s shift to capitalism, was famous for his ability to ‘signal left while turning right’ – a feat the current leadership is trying to emulate in the phrase ‘new socialist countryside’.

It should not be forgotten 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. As Dale Wen points out, "The official media still attribute the rural boom period (1978-84) to the de-collectivisation process. Yet, more than two-thirds of the gains were achieved before 1982, the year de-collectivisation was carried out on a large scale. Other factors, such as rising grain prices and the use of chemical fertilisers, contributed much more to a short-lived success". (Ibid)

Deng and the pro-capitalist wing of the CCP demonised 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 of the Maoist regime, they were often characterised by monstrous levels of centralisation and bureaucracy. The privatisation 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 mechanisation. Labour productivity plummeted, although this process was concealed by the use of greater amounts of labour, including children. As more labour 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 fertilisers. 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 last decade with one-third of these, according to an official report, turning violent.

WTO a new blow

ACCESSION TO THE World Trade Organisation (WTO) in 2001 further deepened the crisis. According to World Bank estimates, three quarters of rural households have lost out from WTO membership. A key reason was the Chinese regime’s acceptance of numerous so-called ‘WTO plus’ commitments (that go beyond WTO rules), which among other things limit its ability to subsidise agriculture. China’s farm tariffs are today among the lowest in the world, 15.3% on average, compared to a global average of 62%. Not surprisingly, China’s agricultural imports have more than doubled since joining the WTO and the idea of self-sufficiency in food production, previously a tenet of CCP rule, has been abandoned. This is a price today’s CCP leaders have been prepared to pay in order to boost manufacturing exports and attract more foreign capital through the framework of the WTO.

Cheap, highly subsidised oilseeds, grain and animal products have flooded into the country. Oxfam points out that imports of subsidised US cotton destroyed 720,000 jobs in poor cotton-producing regions such as Gansu and Xinjiang in 2005 alone. Indeed, this is one factor behind Beijing’s reticence in the face of US demands for a bigger revaluation of the Chinese currency. By making imported foodstuffs even cheaper this would further depress peasant incomes and fuel rural unrest.

Now even Beijing’s foreign capitalist admirers complain its economic model is ‘lopsided’. The regime is under pressure to kick-start domestic consumption and wean the economy away from its current huge dependence on foreign trade, which accounts for over 70% of GDP, compared with a level of 20% in the US and Japan. But China’s impoverished countryside acts as a dead weight on attempts to boost consumption. Last year, consumer spending accounted for just 55% of China’s GDP, the lowest level for 25 years and well below the 70% level in most big capitalist economies. The rural population, almost two-thirds of the total, account for just 32.9% of China’s consumer spending.

As China Daily points out, "Lack of necessary infrastructure such as tap water, electricity and roads in the countryside makes it impossible for farmers to use television sets, refrigerators, washing machines, modern kitchens and toilets, items that should have enjoyed a vast market in the countryside".

In addition to extremely low incomes, China’s high savings rate is a barrier to increased consumption. But the high level of savings is precisely because of the spiralling cost of old age, illness and putting a child through college. To coax Chinese household’s to spend more, capitalist organs like the OECD and World Bank are urging the Chinese regime to rebuild its collapsed social safety net. With the US consumption boom beginning to falter, the strategists of global capitalism look to China’s ‘1.3 billion consumers’ to throw them a lifeline. But China’s total consumer spending was just nine percent of the US level last year – a straw rather than a lifeline!

Not only is the scale of peasant and worker protest unprecedented, but also in the last twelve months a shift has taken place – with protests becoming more organised and coordinated. Taishi is the Guangdong village where campaigners occupied local government offices for weeks demanding publication of financial accounts and new village elections. In his report from Taishi, Edward Cody of the Washington Post spoke of "the spectre of a nascent national leadership and coordination for what so far has been an unconnected series of violent outbursts".

Crucially, rural campaigners are increasingly adopting proletarian methods of struggle, reflecting the fact that rather than just ‘peasants’, those involved are also rural labourers, migrants and other workers. Rather than guerrilla methods, the protests have assumed a disciplined, mass character, using road blockades, occupations, and other collective forms of struggle.

There is a revival of support for Mao, with his portrait, badges or slogans like ‘down with corrupt officials’ a common feature on demonstrations. Rather than conscious acceptance of Mao’s Stalinist ideology and methods, this reflects nostalgia for the old days of the planned economy and the security it provided. This, incidentally, explains the appearance of books like Mao – the Untold Story by Jung Chang and Jon Halliday, which are attempts to inoculate the new generation against the ideas of revolution, rather than Stalinism and Maoism. Labelling their new farm policy ‘socialist’ is in part an attempt by the Beijing regime to tap into the mood of Mao nostalgia, and rekindle the idea – far-fetched as it sounds – that the party is a campaigning organisation for the masses. They fear the CCP faces meltdown in many areas. "The party is not in great shape", comments Cheng Li, a US-based observer. "Loyalty is deteriorating and the grass roots organisations are very weak".

The current debate between an openly neo-liberal wing espousing faster economic ‘reform’ and an allegedly ‘Marxist’ wing, a debate that surfaced openly at the NPC meeting, shows the depth of the social crisis. It is the first time in a decade such rancorous arguments have erupted within the ruling circles. None of the contending factions advocate a return to central planning. Today’s ‘Marxist’ intellectuals and functionaries are not even Stalinists of the old school, but rather an echo of European social democracy, supporting a ‘market’ economy but with more state control or at least a slower pace of liberalisation.

Such is the depth of the crisis, that some CCP leaders have drawn comparisons with the final period of Kuomintang rule in the 1940s, with its massive corruption, criminal gangs, periodic massacres by government troops, and a central government progressively losing control of society. A key difference, however, is the lack of a mass alternative to the regime as existed then in the shape of Mao’s guerrillas. In the upheavals that lay ahead, what’s needed is a mass democratic socialist alternative. Unlike in the 1940s, the driving force of such a movement will be the younger generation in the cities, especially the industrial working class, but also rural activists who increasingly look to the methods of struggle of the urban working class.


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