Having taken the easy steps toward rural reform, the nation now faces its toughest challenge: Assuring livelihoods for farmers.
By Hu Shuli, Caijing 17 February 2009
China should toss out those fantasies about finding an easy way to deal with rural reform. The reality is that “san nong” – the three, interrelated and complex issues confronting rural China for decades – requires a comprehensive approach to deep reform. It’s all about people and livelihoods.
Fortunately, at this critical juncture in the country’s economic development, the importance and intractable status of san nong has been re-emphasized, and its place in the reform process reassured. It happened when the State Council and Central Committee of the Communist Party of China, just after Spring Festival, jointly released a new, so-called “first document” targeting rural issues.
The latest policy treatise called “Opinions on Promoting Agricultural Development and Raising Farmer Incomes in 2009” is the sixth of these first documents in a row focusing on rural themes. It’s also the 11th such document since China’s reform and opening process began in 1978. San means “three,” and the three “nong” issues consistently appearing on China’s agenda are the farming industry (nongye), rural communities (nongcun) and farmers (nongmin).
The document is set against an economic backdrop far more complicated than in previous years. The world economy has fallen into a deep recession, and financial deleveraging by industrialized nations has dealt a blow to the export-dependent development model followed by China and other Asian countries. In China, efforts to maintain short-term economic stability have been complicated by pressure from medium- and long-term structural adjustments. Difficulties in creating jobs for migrant workers – rural natives who labour most of the year in factories and cities far from home -- is intertwined with problematic efforts to raise the income levels of farmers. And in the adjustment process, government intervention tendencies are clashing with market forces.
Indeed, China’s san nong policy is up against a mountain of challenges.
Which of the three “nongs” is most important? This question has been debated for years, but a clear answer has emerged. The number one nong is nongmin: farmers, coupled with their ability to make a living and contribute to domestic consumption. The nation’s vast rural areas are a powerful engine for future growth with enormous potential for consumer demand. Thus, the issue of farmer livelihoods has risen to the top of the agenda while setting the direction for san nong in general.
The emphasis in government agricultural policy must shift from production to people. Much work needs to be done to support and improve livelihoods in rural China. Average per capita income in rural areas is less than one-third urban levels – a gap that has been increasing. Meanwhile, rural spending levels are only one-third the amount spent by urban Chinese.
Through the 1980s, urbanites outspent rural Chinese by a 5-to-2 ratio. From 1990 to 2006, the gap was 3.58 to 1. These figures paint a picture of the disparity between cities and countryside, underscoring the nation’s unequal distribution of wealth. Narrowing this rural-urban gap is a tough task.
But clearly, there is an urgent need to increase farmers’ share of national income – a need that can only be met through rural reform. The goal is to increase farmer income levels at a rate equal to the speed of the nation’s economic development, giving farmers a chance to share the fruits of China’s economic reform. To that end, the nation’s policy agenda must include innovations in the following areas:
First, farm prices must be liberalized. The government has for a long time maintained price controls and restricted the trade of farm products. This deprives farmers their right to receive benefits from rising prices. Despite bumper crops during the past few years, income growth among farmers still lags behind their urban counterparts. And even though government subsidies have reached record levels, it is the market – not the government – that’s in the best position to encourage income growth among the country’s hundreds of millions of farmers.
Second, the nation’s residence registration system must be changed. Allowing willing and able rural residents to live in cities can reduce farm area populations, accelerate urbanization, and increase the per capita utilization of rural resources, which will narrow the rural-urban income gap and raise farmer incomes.
Now when migrant workers lose jobs and return to the countryside, often an immediate reaction among decision-makers is to keep them “immobile” in the countryside, encouraging them to “leave the land but not the rural areas.” The idea is to ensure stability in cities by preventing an influx of unemployed migrants. In essence, this policy holds migrants in a labour pool and eases economic stress. Sending jobless migrant workers back to the countryside also reduces government responsibilities for social security support and forces rural Chinese to bear the brunt of an economic slowdown. Issues concerning people’s livelihoods are left unaddressed.
A final innovation for the policy agenda is to protect the rights of farmers. The government should guarantee the contractual rights of farmers, cement their positions as principal parties in land trades and requisitions, protect their profit-sharing rights, and prevent local governments from using contractual transfer rights to take land from farmers. Not only should the rights of landless farmers be protected, but farmers who voluntarily give up land to work in cities also should have the right to receive reasonable compensation.
The latest first document makes it clear that farmers’ contractual land rights must be protected when transfers occur. A farmer is entitled to legally sanctioned compensation, and his position as a principal party in a transaction must be respected, free of coercion from any organization or individual. Given the fact that some local governments for various reasons force transfers of contractual land rights, these new instructions are timely and take proper aim at the target.
Last but not least, we need a rural social security system. In addition to fine-tuning the nation’s existing medical insurance safety net and expanding its coverage, China needs to create a pension system for farmers. Such a measure would help make up for the sometimes unfair allocation of wealth.
Five of the first documents on rural reform followed a policy theme that changed in the 1980s. Du Runshen, a leading proponent of rural reform, later explained that the nation’s rural reforms “are circumscribed by reforms of the state-owned economy and political system. At that time, we realized we had exhausted all the ‘easy deals.’ It was impossible to take another step without going deeper, into the very structure. Because of this, rural reforms promoted by these first documents came to a halt.”
Now, Du continued, China’s rural reforms “have by no means come to a finish. A new way forward for overall reform must be found.”
Du’s words are thought-provoking. Rural reform ultimately must be included in the nation’s overall reforms. A mark of national reform’s success will be the end of san nong problems. From this perspective, the right way forward is to get rid of any fantasies about finding easy deals to settle difficult issues, such as the urban-rural income gap. It’s time to break free of the historical mold and engage in truly comprehensive reforms.
Putting farmers first and caring about their livelihoods should guide the latest policy decisions on san nong. The significance of this lies not in easing financial burdens but in pursuing institutional reform, and not in focusing on the parts but in working toward an all-around solution.
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China Digs Deeper for ‘San Nong’ Reform
Having taken the easy steps toward rural reform, the nation now faces its toughest challenge: Assuring livelihoods for farmers.
By Hu Shuli, Caijing
17 February 2009
China should toss out those fantasies about finding an easy way to deal with rural reform. The reality is that “san nong” – the three, interrelated and complex issues confronting rural China for decades – requires a comprehensive approach to deep reform. It’s all about people and livelihoods.
Fortunately, at this critical juncture in the country’s economic development, the importance and intractable status of san nong has been re-emphasized, and its place in the reform process reassured. It happened when the State Council and Central Committee of the Communist Party of China, just after Spring Festival, jointly released a new, so-called “first document” targeting rural issues.
The latest policy treatise called “Opinions on Promoting Agricultural Development and Raising Farmer Incomes in 2009” is the sixth of these first documents in a row focusing on rural themes. It’s also the 11th such document since China’s reform and opening process began in 1978. San means “three,” and the three “nong” issues consistently appearing on China’s agenda are the farming industry (nongye), rural communities (nongcun) and farmers (nongmin).
The document is set against an economic backdrop far more complicated than in previous years. The world economy has fallen into a deep recession, and financial deleveraging by industrialized nations has dealt a blow to the export-dependent development model followed by China and other Asian countries. In China, efforts to maintain short-term economic stability have been complicated by pressure from medium- and long-term structural adjustments. Difficulties in creating jobs for migrant workers – rural natives who labour most of the year in factories and cities far from home -- is intertwined with problematic efforts to raise the income levels of farmers. And in the adjustment process, government intervention tendencies are clashing with market forces.
Indeed, China’s san nong policy is up against a mountain of challenges.
Which of the three “nongs” is most important? This question has been debated for years, but a clear answer has emerged. The number one nong is nongmin: farmers, coupled with their ability to make a living and contribute to domestic consumption. The nation’s vast rural areas are a powerful engine for future growth with enormous potential for consumer demand. Thus, the issue of farmer livelihoods has risen to the top of the agenda while setting the direction for san nong in general.
The emphasis in government agricultural policy must shift from production to people. Much work needs to be done to support and improve livelihoods in rural China. Average per capita income in rural areas is less than one-third urban levels – a gap that has been increasing. Meanwhile, rural spending levels are only one-third the amount spent by urban Chinese.
Through the 1980s, urbanites outspent rural Chinese by a 5-to-2 ratio. From 1990 to 2006, the gap was 3.58 to 1. These figures paint a picture of the disparity between cities and countryside, underscoring the nation’s unequal distribution of wealth. Narrowing this rural-urban gap is a tough task.
But clearly, there is an urgent need to increase farmers’ share of national income – a need that can only be met through rural reform. The goal is to increase farmer income levels at a rate equal to the speed of the nation’s economic development, giving farmers a chance to share the fruits of China’s economic reform. To that end, the nation’s policy agenda must include innovations in the following areas:
First, farm prices must be liberalized. The government has for a long time maintained price controls and restricted the trade of farm products. This deprives farmers their right to receive benefits from rising prices. Despite bumper crops during the past few years, income growth among farmers still lags behind their urban counterparts. And even though government subsidies have reached record levels, it is the market – not the government – that’s in the best position to encourage income growth among the country’s hundreds of millions of farmers.
Second, the nation’s residence registration system must be changed. Allowing willing and able rural residents to live in cities can reduce farm area populations, accelerate urbanization, and increase the per capita utilization of rural resources, which will narrow the rural-urban income gap and raise farmer incomes.
Now when migrant workers lose jobs and return to the countryside, often an immediate reaction among decision-makers is to keep them “immobile” in the countryside, encouraging them to “leave the land but not the rural areas.” The idea is to ensure stability in cities by preventing an influx of unemployed migrants. In essence, this policy holds migrants in a labour pool and eases economic stress. Sending jobless migrant workers back to the countryside also reduces government responsibilities for social security support and forces rural Chinese to bear the brunt of an economic slowdown. Issues concerning people’s livelihoods are left unaddressed.
A final innovation for the policy agenda is to protect the rights of farmers. The government should guarantee the contractual rights of farmers, cement their positions as principal parties in land trades and requisitions, protect their profit-sharing rights, and prevent local governments from using contractual transfer rights to take land from farmers. Not only should the rights of landless farmers be protected, but farmers who voluntarily give up land to work in cities also should have the right to receive reasonable compensation.
The latest first document makes it clear that farmers’ contractual land rights must be protected when transfers occur. A farmer is entitled to legally sanctioned compensation, and his position as a principal party in a transaction must be respected, free of coercion from any organization or individual. Given the fact that some local governments for various reasons force transfers of contractual land rights, these new instructions are timely and take proper aim at the target.
Last but not least, we need a rural social security system. In addition to fine-tuning the nation’s existing medical insurance safety net and expanding its coverage, China needs to create a pension system for farmers. Such a measure would help make up for the sometimes unfair allocation of wealth.
Five of the first documents on rural reform followed a policy theme that changed in the 1980s. Du Runshen, a leading proponent of rural reform, later explained that the nation’s rural reforms “are circumscribed by reforms of the state-owned economy and political system. At that time, we realized we had exhausted all the ‘easy deals.’ It was impossible to take another step without going deeper, into the very structure. Because of this, rural reforms promoted by these first documents came to a halt.”
Now, Du continued, China’s rural reforms “have by no means come to a finish. A new way forward for overall reform must be found.”
Du’s words are thought-provoking. Rural reform ultimately must be included in the nation’s overall reforms. A mark of national reform’s success will be the end of san nong problems. From this perspective, the right way forward is to get rid of any fantasies about finding easy deals to settle difficult issues, such as the urban-rural income gap. It’s time to break free of the historical mold and engage in truly comprehensive reforms.
Putting farmers first and caring about their livelihoods should guide the latest policy decisions on san nong. The significance of this lies not in easing financial burdens but in pursuing institutional reform, and not in focusing on the parts but in working toward an all-around solution.
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