A new situation and new tasks at the new stage of rural development: some suggestions on carrying out the campaign for building new socialist rural areas centered on the development of small towns

In recent years, sales of agricultural products have been sluggish and the market has been sagging with price drops. Township and village enterprises are declining. Fanners’ income increases slowly. These problems are reflections of periodical changes in the development of agriculture and rural economy. The problem at present is how to understand the new stage of rural development. What are the goals and tasks at this new stage? What policies and methods should be adopted to solve current problems? How can the new missions and new tasks at this new stage of rural development be realized? These questions should be answered in both theoretical and practical terms.

New problems at the new stage of rural development

Since 1996, there have been good harvests in succession, but the income of fanners has decreased, and it is hard to get the market in gear. The year 1996 witnessed the third bumper harvest in agriculture since the reform and opening up. The total grain production broke the record, exceeding 1 trillion Jin (1.009 trillion jin) J In

  • 1997, the whole country was hit by a great drought and in 1998 by severe floods. Despite this, agriculture production continued to increase. Comparing 1996 with
  • 1998, the total production of gr ain increased by 1.5%, the total output of cotton 7.1%, oil-bearing crops 4.7%, sugar 17.1%, fruits 17.2%, meat 24.6%, and aquatic products 18.8%. The year of 1999 will be still another bumper harvest year. Total grain production will once again exceed 1 trillion jin, at the same level as in the year of 1996. One should say that the situation in agricultural production has been very good in recent years, and has guaranteed the supply. However, since the winter of 1996, grain, cotton, and other agricultural products have become difficult to sell and prices are falling. After the summer of 1999, the main agricultural products all run into sales difficulties. The market has turned sluggish and prices has fallen successively. Agricultural products have gone from shortage to excess, and the market for agricultural products has changed from a sellers’ market to a buyers’ market. The prices of agricultural products are falling continuously by a large margin, making fanners’ income a problem. In November 1996, the average price of the three commodities com, wheat, and rice, in urban and rural markets across the country, was 1.0355 yuan per jin. On November 30, 1999, the average price of these three commodities in the grain markets nationwide was 0.7075 yuan per jin, a drop of 0.328 yuan per jin. The decline was 31.68% compared to 1996.

Calculated on the basis of 1996’s total grain output of 1 trillion jin nationwide with the market price of 1.0355 yuan per jin, the income obtained by fanners from grain in the whole country was 1.0355 trillion yuan. There were 864.39 million fanners that year. The per capita income obtained from grain was 1198 yuan. The total gr ain output in the country will once again reach 1 trillion jin in 1999. The grain price on the market is 0.7075 yuan per jin in November. The fanners’ income from grain reduced to 707.5 billion yuan, a decrease of 328 billion yuan compared with 1996. The per capita income decreased by 31.68%. The estimated number of farmers that year was 870.83 million and the per capita income fr om grain was 812.7yuan, a decrease of 385.3 yuan and 32.16%, compared with 1996. Because the commodity rate of grain was low, about 30%, the cash income of fanners did not decrease that much. Due to falling prices, the cash income of each fanner redttced by a little over 100 yuan. However, it is a fact that, in the annual per capita net income of farmers, the income from grain will decrease by more than 300yuan in 1999 compared with 1996.

The price of cotton at its highest, according to the standard purchase price of lint cotton set by the state, was 7 yuan per jin. The price has decreased successively in recent years. At present, it is only 3.8 yuan per jin. The total cotton output of the country in 1996 was 4.203 million tons, that was 8.406 billion jin. The income of fanners from cotton was 58.842 billion yuan, with a per capita income of 68.07 yuan. The total cotton output in 1999 was the same as in 1996. However, fanners’ income from cotton was only 31.9428 billion yuan, 26.899 billion yuan less than in 1996. The per capita income was 38.68 yuan, a drop of 31.39 yuan compared with 1996. The decline was 46.1%. In the cunent income structure of fanners, the income from agriculture is still the main source. In 1996, the per capita net income of fanners was 1926 yuan, of which 1065 yuan - about 55% of the total net income - was from agriculture and animal husbandry. And among the income from agriculture and animal husbandry, the largest part came from grain. In many regions, it accounted for more than 60% of the fanners’ net income. In the past three years, the prices of grain and cotton have fallen by 30-40%, which has caused a substantial drop in fanners’ real income. Even in the economically developed province of Guangdong, the situation is the same. In 1998, the grain output in the countiy increased by 1.2%. Pork, aquatic products, fruits and vegetables. etc., also had different degrees of increase in production. However, due to the decline in the prices of agricultural products, the per capita cash income of fanners decreased by 3.6% compared with 1997.

In recent years, urban and rural enterprises have been languishing. Under the pressure of competition in the domestic market and the impact of the Asian financial crisis, exports of township and village enterprises have declined, and their products become a tough sell. It is increasingly difficult to obtain loans. These enterprises face considerable difficulties to develop with the weakening of the capacity to take on laborers. The pace of growth has slowed down, and economic returns decreased. The losses inclin ed have exceeded 15%. About 40% of township and village enterprises have stopped or partially stopped the production. The sluggish township and village enterprises have hindered the development of the whole rural economy and caused a substantial reduction in fanners’ business and wage income. Due to various factors, such as the reform of the state institutions and state-owned enterprises, and the cutting of the payroll to improve efficiency, urban enterprises have dismissed a large number of migrant workers. Some cities have also formulated many regulations restricting the employment of migrant workers. It has become more and more difficult for farmers to work in cities. Many fanners, who have worked in cities for many years, have to go back to the countryside. According to the estimation of authorities concerned, tire year with the largest number of migrant workers was 1995, reaching about 80 million. The number has gradually decreased in recent years. In 1999, there are about only 50 million. Calculated on the basis of an average annual net income of 2000 yuan for each migrant worker in cities, rural income will be reduced by more than 60 billion yuan.

In these respects, fanners’ real income - especially that of fanners in the central and western regions, whose income is mainly from agriculture - has decreased in the past three years rather than increased. It is the first time that this situation has occurred since the refonn. Therefore, the government proposed to develop rural markets in 1997. Two years have passed since then, and rural markets have not expanded. According to various investigations by different authorities, the most important reason is not that fanners don’t need the goods sold in the rural markets, but rather that the vast majority of farmers have no money.

Rural development has run into obstacles. This is mainly the result of the failure of the second-step rural refonn to further break through the shackles of the planned economy and the bifurcated urban-rural social structure. Since the 1990s, the planned economy has resurged in many respects, resulting in the widening of the gap between urban and rural areas, and solidifying the separation between the urban and rural areas. The problems in rural areas are becoming more and more serious.

In 1978, the refonn was launched first in rural areas. The household contract responsibility system was put into practice and the people’s communes were dissolved, which brought about a giant leap in productivity. As the production of agricultural products increased, there emerged a large number of surplus rural laborers. Restricted by the household registration system which classified residents as urban or rural, fanners set up township and village enterprises, which made it possible for them to leave the land but not the home village ^■).3 However, as the number of fanners in China was huge, rural areas simply could not absorb so many surplus laborers. By the end of the 1980s, a large number of fanners had already moved to cities to seek employment. This was also what the cities needed. The number of migrant workers reached its peak in the middle of the 1990s. Due to the restriction of the household registration system, migrant workers’ occupations have changed, but not their status as fanners. Many fanners work in cities for more than 10 years without their rural status being changed. They are like migratory' birds coming in the spring and leaving in the winter, forming migrant-worker tides. Otte important reason for this phenomenon is that the pattern of the bifurcated urban-rural social structure formed under the planned economy' and the household registration system to this day have not been fundamentally reformed. In the past 20 years, China has carried out large-scale industrialization and industry has entered a stage of rapid development. It should have been accompanied by' the migration of large numbers of fanners into cities, thus greatly reducing their number in the countryside. This, however, has not been the case. In 1978, China’s agricultural population was 790.14 million. Instead of decreasing, the rural population had increased to 868.68 million by 1998, a rise of 78.54 million in 20 years, with an average annual net increase of 3.927 million people. In terms of economic structure, China is already an industrialized country, but in terms of employment structure, it is still a peasant society. Urbanization lags seriously behind industrialization. Social structure and economic structure are not coordinated. Urban and rural development is out of balance. These are the main reasons for many current economic and social problems.

Since the implementation of the household contract responsibility system, agricultural production has kept good momentum. With the exception of a few major types of products such as aquatic products and fruits which were liberalized earlier and ran relatively well, the circulation system of main agricultural products such as grain, cotton, and oil has been oscillating between giving a free hand and control since the start of the reform in 1985. So far, it has not been possible to form a pattern compatible with the socialist market economy. The state has to put in a large amount of financial subsidies every year. The circulation sectors of grain and cotton have all suffered great losses. Fanners do not get any benefits. Since the early 1990s, Shandong province has obtained considerable experiences of industrializing agricultural operation, which has been taken up by many places successively. In recent years, agricultural industrialization has been taken seriously and vigorously promoted in various regions by the central authorities and academia. But progress has been slow. In spite of the push, it has not become widespread. Why? The reason is that under the planned economy, the production and circulation of agricultural products were administered separately by different authorities. This has not been completely reformed according to the requirements of the market economy. Take the production and circulation of grain, for example. The plarming and organization of grain production and the popularization of agro technology are the responsibilities of the Ministry of Agriculture; purchase, sale, distribution, and storage are managed by the Grain Bureau; grain processing is placed under the Ministry' of Light Industry; and the import and export of grain are in the hands of the Ministry of Foreign Trade. So many departments are involved -and each has its own interests. To bring production, supply, and sale under a coordinated process and to set up an integrated system of agriculture, industry, and commerce is easier said than done. It is therefore not difficult to understand why agricultural industrialization has not been extensively carried out in spite of the push from the central leadership.

The reform of the circulation system of agricultural products has gone back and forth. It is not because it is difficult to build a new circulation system of agricultural products compatible with the socialist market economy, but rather because some departments refuse to give up the interests formed under the former planned economic system. In the past few years, some products and their purchase have once again been put under monopoly. This is in reality the protection of the interests of these departments at the expense of the interests of the vast majority of fanners. This old practice of maintaining the planned economy is unfavorable for the formation and development of the socialist market economy.

Since the middle of the 1980s, party and government organizations at the township and village levels have kept growing and the ranks of cadres has swelled with no financial support; this is the main reason why the more we try to reduce the burden of fanners, the heavier it becomes, and it also what lies behind the fr equent occurrence of social conflicts in rural areas. Dining the period of the people’s communes, political and social governance were integrated. A commune had altogether a little over 20 cadres in the party committee and commune administration. Larger communes had more than 30 cadres. In a production brigade, there were only four or five cadres. With the introduction of the household responsibility system, the communes were dissolved. Township governments were subsequently set up. The production brigades became village committees. The titles of the cadres changed accordingly, but not then- number. For quite some time (five or six years) after the implementation of the all-round contract system in the countryside, with the disappearance of the former functions of organizing collective production and operation, township - especially village - cadres felt at a loss as to what to do. Most of them went home to till the contracted land. When county (county-level city) officials went to the countryside, it was hard for them to find cadres in the villages, which gave rise to the problem of the so-called paralyzed, semi-paralyzed countryside. But it was precisely during this period of time that the burden of farmers was the lightest. Thus, it did not become a social problem in the countryside. After the middle of the 1980s, the party and the government once again laid emphasis on strengthening the leadership in the countryside and on doing a good job in providing socialized sendee for agricultural production. After the termination of the purchase monopoly and the introduction of purchase by contract in 1985, prices of grain in the market soared. The price for purchase by contract was much lower than the market price. The government therefore emphasized that grain purchase by contract was also a task. Fanners were mobilized to fillfill the gr ain quotas through the efforts of township and village cadres. Rural grassroots organizations were gradually strengthened and developed on the new economic basis. During this time, the attention of the leadership from the county (comity-level city) level upwards was mostly focused on developing industry and the urban economy, and solving urban problems. When the household responsibility system was introduced in the rural areas, there were no clear arrangements and regulations concerning such questions as how to build grassroots political organizations, what the organizational structure should look like, how large the staffing should be, and how many extra staff may be permitted.

It was under such circumstances that the ranks of cadres at the township (town) level rapidly swelled. The organizations were getting bigger and bigger, reaching an unprecedented scale.

First, the number of township (town) cadres increased substantially. In townships, besides party secretaries and the heads of townships, many deputy secretaries and deputy township heads were added. The chairmanship of the National People’s Congress (together with the office of the NPC) was created. Nowadays in a township (town), there are 10 or more cadres from the deputy heads upwards. Second, there was an overexpansion of organizations. In some economically more developed townships (towns), economic committees, industrial offices, and so on were set up. More and more institutions were created. The posts of eight assistants in the former township government were upgraded to offices and stations. For example, the financial assistant was upgraded to Financial Office, the public security assistant to Police Station, the water conservancy assistant to Water Management Station, the culture and education assistant to Office of Culture and Education, and the family planning assistant to Family Planning Office. Moreover, Land Management Office, Traffic Control Station, Power Management Office, and so on, were added to the list. Some less developed or underdeveloped townships gradually followed suit. Third, there was excessive overstaffing. Since there is no restriction on the appointment of fanners as cadres and functionaries, and the cadres in charge in townships could make arrangements and transfer fanner cadres just as they wanted, the number of various office personnel and workers - as well as drivers, service people, and cooks - in the township governments have greatly increased in recent years. At the present, a township government has dozens of people at the minimum, some have more than 100, even 200-300 people, several times or even 10 times more than the authorized size, which is larger than a county government in the 1950s.

For village-level organizations, the state stipulates that only three to five people enjoy fixed subsidies and in large villages, and no more than five to seven people. But at present in an administrative village, apart from a few key persons in the party branch and the village committee, there are also a first deputy head of the village, a deputy village head in charge of industry, a deputy village head in charge of animal husbandly, etc. In addition, there are varying numbers of members in the party branch and the village committee, a militia company commander, a league branch secretary, director of women’s federation, director of public security, and director of mediation. Moreover, there are anywhere from more than 10 to more than dozens of people in each village responsible for family plaiming or working as electricians and plumbers, and so on. With so many “officials,” so many people in charge, and so many people on the payroll without state financial expenditure set for these people, the only thing to do is to impose charges on fanners under various names. How can the burden of fanners be reduced?

In the past few years, the state explicitly prohibited township and village cadres to deduct various apportioned expenses from the money fanners obtained through grain and cotton sales at the grain and cotton stations. The stations were required to settle the accounts with each household after the sales. In order to get the “three reserves and five fees” (HJJe31£&)4 and other charges, rural cadres had to go from door to door to collect them. For those who were unable to pay, the cadres would send people to urge them to pay. Some went so far as to bring security personnel or militiamen with them to demand payment, causing all kinds of clashes. Others took grain, cattle, and pigs from farmers when they failed to collect the fees, resulting sometimes in life-and-death incidents and causing tension in the relations between rural cadres and the masses. In recent years, fanners’ petitions and complaints have been increasing. The root causes behind most of them are the problems just mentioned.

After the 1990s, township (town) level finance has been successively established in various regions; across the country, financial offices have been set up, but in practice, a lot of problems have arisen. The financial offices are in charge of salaries, health care, travel, welfare, and daily expenses of township (town) cadres, primary and secondary school teachers, medical staff in health centers, and a large number of personnel not on the regular payroll. These financial expenditures are rigid, but there is no fixed source and quantity of financial revenues. Particularly since the fiscal and tax reform in 1994 when the tax sharing system was introduced, more stable and better tax sources have been collected by governments at the prefectural level (prefectural-level cities) and above, which is why the financial situations at these levels have been generally or relatively good in recent years. The situations from the county level and below, on the other hand, have in general not been so good, as there is little left of the good financial and tax sources when it comes down to these levels. Counties and county-level cities retain some sources that are left. At the township (town) level, there are scarcely any tax sources or stable revenue. Most of them face financial difficulties. This is the reason why cadres and teachers in primary and secondary schools in townships (towns) very often do not get paid for months.

According to the investigations of relevant parties, about 50-60% of the existing townships (towns) are unable to make ends meet and face economic constraints. Under such circumstances, there are only two ways for heads of townships (towns) to keep the governments limning and maintain daily expenses. One is to rely on borrowed money. According to a survey of seven provinces in the central and western regions by relevant parties in the summer of 1998, the average liabilities of each township government was 2 million yuan at that time. A considerable number of village-level organizations were also in debt, an average of20,000 yuan per village. Some owed debts to banks or credit cooperatives, and others got money through embezzlement or borrowing from loan sharks. The second way is to appoition the expenses on fanners and enterprises in various ways. Unwarranted fees, fines, and fund-raising are all forced out of this. Without the support of normal and stable fiscal revenues, it is hard to imagine that a government can maintain normal operation and impartial performance of governmental functions.

After the reform of the financial system in 1994, deposit, loan, and other services of banks and credit cooperatives have been placed under the vertical management of the financial system. Currently, the Agricultural Bank and credit cooperatives collect deposits basically only in rural areas. Not only fanners have difficulties to take out a loan from these institutions, but county and township governments are also in no condition to obtain loans from them. At present, in rural areas, the lack of financial channels makes it very difficult for township and village enterprises, or individual and private enterprises, to develop.

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