Farmers will benefit from higher spending
By Lin Yifu (China Daily)
Updated: 2006-03-06 05:44

Since the 16th National Congress of the Communist Party of China (CPC) in 2002, the issues involving agriculture, the countryside and farmers have been at the top of the agenda.

The CPC Central Committee put forward a concept of bringing about a new socialist countryside in the drafting of the 11th Five-Year Plan (2006-10).

This new countryside is supposed to enjoy advanced production, improved livelihoods, civilized social mood, clean and tidy villages and democratic management.

Although the agricultural sector's performance has been good since the late 1970s when the country embarked on the road of reform and opening up, farmers' income growth has been slow because the demand for farm produce has risen relatively slowly.

Between 1998 and 2004, for example, the annual net income of the average rural resident increased by only 4.3 per cent, half of the 8.6 per cent growth rate in urban areas.

As a result, the income gap between rural and urban people widened, from 2.6:1 in 1978 to 3.2:1 in 2004.

With the problem becoming increasingly pronounced, people have begun to worry about agricultural production.

The crux of the matter lies in promoting farmers' income.

The question is "how?"

It is generally thought that promoting agricultural production is of strategic importance to the nation's security in terms of having sufficient grain supplies. But exclusively increasing farm output gives rise to the situation that "low prices of grain hurt farmers," a scenario which haunted Chinese rulers in past dynasties.

Historical experience in China and the world shows that sustained income growth for farmers can be achieved only through realignment of production and employment structures so that the rural labour force can switch to sectors other than agriculture.

After this kind of switch, ex-farmers turn from farm produce suppliers into farm produce consumers. On the other hand, those who choose to stay on the farmland have more land to till, which helps expand the size of their operations. All this translates into sustained growth in income for farmers and ex-farmers.

This is vindicated by the country's own experience in the past 30 years since the household contract system with remuneration linked to output was introduced.

In the mid and late 1980s, for instance, township enterprises developed rapidly across the vast countryside, absorbing 120 million farmers. In the early 1990s, another 100 million farmers left their land and went to cities to work as migrant workers.

But employment began to slide in the late 1990s as a result of surplus of production capacities and deflation. This served to block the channel through which rural labourers transfer to non-agricultural sectors.

This has led to the increase in numbers of land-bound farmers since 2002, 3.4 million each year. The farmers' income growth, therefore, slowed down further, which renders the whole rural situation all the more severe.

Tapping into the potential demand of farmers, which has become pent up like water in a reservoir, may offer an answer to the question of surplus production capacities.

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 this context, the bid to bring about a new-type countryside becomes imperative, both economically and socially, because it helps promote infrastructure construction, improve farmers' livelihoods, give an outlet to the pent-up consumption demand and channel rural labour force into urban areas. All in all, it offers a key to resolving the long-standing problems involving agriculture, the countryside and farmers.

The 16th National Congress of the CPC set the goal that the country as a whole should be built into a moderately prosperous society by 2020. The per capita annual income is supposed to reach US$3,000 by then.

Taking into account the current income growth rate of the nation as a whole, it is not an ambitious target. But the countryside poses a problem if the 5 per cent yearly income growth rate of the average farmer remains the same, as rural per capita income would be merely US$1,000 by 2020.

The gap between urban and rural would be all the wider and a harmonious society would, therefore, be harder to achieve.

Again, building a new countryside is urgently called for.

The No 1 circular in 2006 issued by the CPC Central Committee demands that, from now on, the sum of funds supporting rural development should be larger than previous year's and that budget money earmarked for rural construction should be more than the previous year's, especially the money spent directly on improving farmers' lives and rural production.

On condition that this policy is carried out to the letter in the years ahead and that farmers get actively involved in the programme, the efforts to build a new countryside are bound to bring substantial benefits to the farmers.

The author is the director of the China Centre for Economic Research at Peking University.

(China Daily 03/06/2006 page4)