China Spreading Wealth to Rural Areas

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Farmers incomes to double in next decade

Oct. 13 – During the 3rd Plenary Session of the 17th Communist Party of China (CPC) Central Committee, leaders pledged to double per capita disposable income of rural residents and eliminate poverty by 2020.

With over half of its population engaged in farming and living in rural areas, the plans will have a sweeping effect on China’s development as the nation tries to narrow the income gap between the wealthy coastal areas and the lower incomes of its hinterland.

The country has set a target of doubling per capita disposable income of rural residents by 2020 from the current 2008 level. Per capita rural disposable income in 2007 was RMB4,140, a year-on-year gain of 9.5 percent in real terms. A rise of at least six percent is expected this year. The rural population still in absolute poverty levels was reduced to 15 million last year, down from 250 million in 1978.

“Rural infrastructure is still weak and needs improving. Rural development is lagging behind and needs support. Farmers’ incomes are increasing slowly, and need to be pushed up,” said the communique released at the session’s close.

Major reforms to permit this have occurred in land ownership reforms, which will allow China’s 800 million peasant farmers to lease their land use rights to other individuals or companies, such as large farming collectives on an industrial scale. At present, China’s agricultural sector is dominated by households operating small parcels of land allocated by the state. The new policy will alter this to a more modern system of industrial-scale farming by agricultural companies.

This reform has been a long time coming, and will not formally break with the communist principles of collectivization. Land will continue to belong to the state, but the “leases” that were introduced by reformers in 1978 could now be lengthened to 70 years, giving farmers far greater freedom over what to do with the land. When it was launched the “household responsibility system” allocated plots of collectively-owned land to individual families for periods up to 30 years, allowing families to make decisions about what to grow and to reap the profits. That has now been extended. However, the management of this system still has to be worked out; there are concerns that less well-educated farmers could sell their land use rights at low prices to more aggressive agricultural collectives and lose their main sustenance asset of food production.

Pilot schemes to assess agricultural industrialization and its impact on rural farmers however have been successful in Xinjiang, with farmers selling rights onto State-owned-enterprises, encouraged to invest the windfall, and still have family members hired to work the land. Massive investments in the industry have allowed huge areas of wheat and grain producing areas to be managed on a large scale and with proper equipment.

“We have been watching the developments in Xinjiang’s agricultural policies for some time,” says Chris Devonshire-Ellis, senior partner at Dezan Shira & Associates. “Our firm has multinational clients that supplies heavy duty equipment such as tractors and combine harvesters in the region. The policies there of industrializing the land, providing compensation to farmers, and yet also giving farming communities employment seem to have evolved to a workable balance. If this model can be adapted to the central regions, and be properly managed, China will undergo a huge revolution in its agricultural industry with very positive implications for the rural areas.”