On December 5, China Economic Weekly reported on a
special one-month investigation on rural development and the future
of Chinese farmers, focusing on the changes the abolition of
agricultural tax may make.
The reduction in rural people's tax burden was announced by
Premier Wen Jiabao in his government work report to
the National People's
Congress in March and aims to improve the living standards
of farmers, many of whom have been left behind by China's rapid
economic growth.
According to the National Bureau of Statistics (NBS), from
1979 to 1994 agricultural tax collected 1,300 billion yuan (US$162
billion), during which time the government invested 370 billion
yuan (US$46.3 billion) in rural areas.
At the end of this period, farmers' annual tax burden totaled 81
billion yuan (US$10 billion), 5.2 times more than that in 1979.
In recent years, farmers have contributed around 15 to 30
percent of GDP, and though each farmer creates nearly 25,000 yuan
(US$3,100), their income is less than 10,000 yuan (US$1,250) on
average.
"The household contract responsibility system with remuneration
linked to output can only resolve the problem of food and clothing
and under the current situation it cannot promote further
development," Cai Fang, director of the Institute
of Population and Labor Economics told China Economic
Weekly.
Many could return to poverty
Since 1978, millions of rural people in China have been helped
out of poverty, but though many are now fairly comfortable, with
enough food, clothing and even some extra money, they are still in
a vulnerable position where natural disasters or health costs could
push them back.
The NBS said that from 1997 to 2004, rural people's annual
income growth was less than 5 percent and was slowing.
In 1996, the rate was 9 percent and this dropped to 4.6 percent
in 1997and 4.3 percent in 1998. In 1999 it was 3.8 percent and in
2000 2.1 percent.
It rebounded to 4.2 percent in 2001, 4.8 percent in 2002, 4.3
percent in 2003 and 6.8 percent last year, which China Economic
Weekly said was due to tax cuts.
China Economic Weekly said the income gap ratio between
urban and rural residents was 3.3 to 1 in 2003, even before various
benefits available to urban residents were taken into account.
At the end of 2003, according to the NBS, the number of
extremely poor people had fallen to 28.2 million, and the number of
rural people whose basic needs were met but who were still
vulnerable was 58.25 million, 6.2 percent of the rural
population.
The Ministry
of Finance said the gradual abolition of agricultural tax from
next year would benefit more than 800 million rural people as their
economic burden would drop 40 percent.
A 2004 China Economic Weekly survey of Jiangsu Province
farmers' income found the highest income area to be Suzhou
Industrial Park, where the average annual income was 7,800 yuan
(US$951) and the financial burden 18 yuan (US$2.2). But in the
lowest income area, Guannan County, the average annual income was
2,650 yuan (US$325) and the burden 42 yuan (US$5.2).
Chen Xiwen, deputy director of the Communist Party of China's
Leading Group of Finance and Economy, said: "The abolition of
agriculture tax and reduction of farmers' financial burden is only
an ancillary method. In order to really deal with the problem, we
should find new income growth opportunities for farmers."
Lack of investment
According to NBS figures, investment in agriculture in 1996 was
8.82 percent of GDP and in 1997 it was 8.30 percent. Because the
huge flood of 1998, it leapt to 10.69 percent, but fell to 8.23
percent in 1999 and 7.75 percent in 2000.
In these five years, GDP increased 121 percent from 740 billion
yuan (US$90.75 billion) to 1,638.6 billion yuan (US$201 billion),
whereas investment in agriculture increased 75 percent from 70
billion yuan (US$8.6 billion) to 123.1 billion yuan (US$15.1
billion).
On January 30, the government issued an important document that
said its focus would shift from "enhancing farmers' income growth"
to "improving the overall production capacity of agriculture."
"During the past 50 years, resources from rural areas were sent
to cities," Ren Dajun, director of Beijing Dajun Economic
Observation and Research Center, told China Economic
Weekly. "In many places, resources have left and insufficient
investment remains."
Lin Yifu, Peking University
professor and rural development expert, said rural residents
constitute 58.2 percent of the population, and even if per capita
annual income reaches US$3,000 in 2030 this figure will still be 30
percent.
In many places, the outflow of capital is very serious, and
China Economic Weekly reported it reached 60 to 70 percent
of all rural capital.
"The government should increase investment in rural areas year
by year," economist Xiao Zhuo said, adding that the ratio of
investment should be 9 to 10 percent of GDP and the government
should emphasize rural public infrastructure construction.
Rural public infrastructure
Lin said: "In the past, the government did not pay enough
attention to the construction of rural public infrastructure. It
can help resolve the problem of an overabundant labor force and
increase farmers' income and living standards."
According to China Economic Weekly, China has the
widest income gap between urban and rural areas in the world: a
ratio of 3.24 to 1 in 2004. However, Qiu Xiaohua, NBS deputy
director, said the ratio could be as high as 6 to 1.
Cai said there are two ways to increase rural people's incomes:
to improve productivity and to adjust industrial structures.
Despite the positive effects of abolishing agricultural tax,
Chen said it also meant less revenue for rural local governments
since in 2004 agricultural taxes raised 125 billion yuan (US$15.3
billion).
He said local governments might have to reduce personnel and
restructure themselves to help make up the shortfall.
"Governments at all levels could collect 95 billion yuan
(US$11.7 billion) from other sources, but that would still leave 30
billion yuan (US$3.6 billion)," he said.
(China.org.cn by Wang Ke December 13, 2005)