Systemic Problems that Keep China’s Farmers Poor

Over these past few days we’ve gotten a better picture of life for China’s farmers. Today I want to look at some of the systemic issues that are keeping China’s farmers at a disadvantage.

First though I think it’s important to establish that China’s current growth has been built at least partially at the expense of the rural population.

Most of you are probably familiar with China’s famine that killed hundreds of thousands during Mao’s rule (officially due to bad weather, actually due to over ambitious agricultural plans and fear of being punished by higher up officials). As the peasants starved to death in the countryside, which in a few towns even led to cannibalism, people in China’s largest cities were largely unaware of what was happening in the rural areas.

In modern China this trend continues as farmers are often squeezed to make life more comfortable in the cities.  This happens largely in three ways.

Hukous – China’s system of city citizenship is both unique and complicated. Being an urban citizen entitles you to a pension, gives you access to better schools and healthcare, along with slightly higher taxes. The rural citizenship gives you land access for farming (even though the plots are quite small), but locks you out of many other opportunities.

It can actually be more difficult to become a “citizen” of Beijing than many foreign countries. Earning this hukou requires nearly a decade of residency in the capital, a high salary, and some kind of marketable skill. For migrant workers (former farmers) it is nearly impossible to become a full citizen anywhere outside of your hometown. This makes the distinction between urban and rural both a social difference as well as a legal difference.

This Hukou system allows the gov’t to provide social security programs to a select population, while excluding the rural masses.

Taxes – In the countryside the problem isn’t that taxes are too high; it’s that they are too low. Legally local governments can only collect 5% in tax from the rural residents, and as we saw yesterday rural residents hardly earn any income. So when you only take 5% of a few hundred dollars, you aren’t left with much money to pay teachers, fund hospitals, or create social welfare programs. When you add in the expenses of China’s bureaucracy (1 gov’t worker for every 67 people, not counting teachers), the possibility of providing decent services with 5% taxes is laughable.

In many places this has led to two outcomes: 1) Local gov’ts with thousands if not millions of RMB in debt from the cost of local governance and their vanity projects or 2) peasants being nearly taxed to death. The problems in the countryside caused by the Chinese tax system are laid out in detail in Chen Guidi’s exposé “Will the Boat Sink the Water”.

These problems are exacerbated by the national governments policy of treating each city and town like a completely separate entity, money flows up from these rural towns to the cities and to the country, but little money from the national government ends up in the places with the direst need.

Fear of Inflation – Food inflation is one of the government’s biggest worries at the moment, with prices rising over 10% since last year. The government’s solution though has been to try to freeze price increases on vegetables and staples. This means that farmers make less money, but all non-food items still cost them more. This means that urban residents are being favored over their rural counterparts. Ensuring stability in the high population centers, and limiting unrest to the places which can be most easily controlled.

Until the government begins to make sweeping policy changes little will change for China’s farmers.

10 responses to “Systemic Problems that Keep China’s Farmers Poor”

  1. Pelo says:

    I keep hearing how China plans to urbanize millions of its rural population over the next decade or so. If this is true, the issue is definitely on the government’s radar.

    • Tom says:

      There is a plan for more people to move to the cities, but I’m not sure if/how they are planning to extend the city citizenships.

  2. Paul Tontodonati says:

    1 gov’t worker for every people? How many exactly… it’d be an interesting stat.

    • Tom says:

      Sorry, I missed filling that in, I knew I was forgetting something.
      According to will the boat sink the water, During the:
      Western Han (206bc-8ad) 1 official :7,945 people
      Eastern Han (25-220) 1:7,464
      Tang (618-907) 1:2,927
      Yuan (1271-1368) 1:2,613
      Ming (1368-1644) 1:2,299
      Qing (1644-1911) 1:299
      Modern Era (1911-2008) 1:67

      • Paul Tontodonati says:

        Thanks Tom! Its an interesting stat…

        Makes me wonder what the comparable would be in developed countries.

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  5. Cynthia says:

    I am a Chinese and I totally agree with you, good job you have done in China.

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