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Rural Cash Squeeze Slows Reforms

China News Digest, 8 January 2002

[CND, 01/08/02] Hopelessness and poverty drove ZHANG Yanchang to take rat poison, after local officials took his grain stores when the Gansu farmer could not pay the taxes they demanded, the South China Morning Post reported Monday.

Also in Gansu province, an elderly peasant woman, MA Youxiong, died from her injuries after falling to the floor during a dispute with local officials just four days before Zhang's suicide.

A fight had broken out between the eight officials and Ma and her son when the Mas continued to refuse to pay the extortionate taxes.

The Legal Daily reported their deaths in its April 14 edition, and the county and village officials involved were handed administrative penalties.

But rural experts have said that official media exposes have revealed only the tip of the iceberg, and that relations in the countryside were worsening day by day.

Between October 2000 to August 2001, authorities in Beijing received at least 26 reports of suicides in farming communities in connection with tax disputes with local officials, and many other cases were hushed up by local governments, a rural expert said.

China's countryside has become a bomb waiting to go off. As farmers' cash income dwindles, rural governments lose tax revenue and approach collapse, and hostility between rural cadres and farmers comes into the open.

The growing gap between rural and urban residents in China has been illustrated by a recent calculation of the Gini co-efficient, an internationally used means of measuring income disparity.

Statistics gathered by the central government reveal that the Gini co-efficient between rural and urban incomes recently reached 0.59. 0.4 is considered a dangerous level, so the high figure has significant ramifications for social stability. Income disparity between coastal and inland areas is not the most acute problem. What is most urgent is the income gap between rural and urban areas, an expert said.

The woeful financial position of rural local governments across China only complicates the situation. Research analysts' reports suggest that the actual debt incurred by rural governments totals 800 billion yuan (HK$755 billion), several times higher than the 200 billion yuan figure put forth by the Government.

As a result, almost half of local governments are unable to pay local officials' salaries. To make up the difference, the officials often extort money from impoverished local farmers.

The farmers always get the impression that cadres force them to pay the fees so that the cadres can get the wages. Some even swindle the public funds by buying luxury cars and building large offices. Of course the farmers don't like the cadres, one rural scholar said.

Even the restrained state media has admitted that relations between rural cadres and the masses are tense. A researcher with extensive experience doing field work in rural areas argues that physical disputes between officials and farmers have already begun to erupt across China.

It depends on how you define uprisings. If protests of about 10 people are uprisings, then uprisings are taking place in China one after another, the researcher said.

In 2001 the central government tried to counter the grievances of the rural population by gradually broadening the scope of the tax-for-fee experiment.

Under the plan, a standardized tax code gradually replaced a range of taxes, fees and levies previously imposed on farmers. In Anhui - the province in which the project was piloted - the standardised tax on farmers was capped at seven per cent of money income, with an extra 15 to 20 per cent to be paid in the form of grain.

To make up the resulting revenue shortfalls for local governments, the central government in Beijing intended to earmark and distribute 30 billion yuan in subsidies across the country.

The truly revolutionary reform reduced the financial burden of Anhui farmers by a third. However, the scheme was abruptly suspended in July, when Premier ZHU Rongji conceded that it was too risky to expand the measures.

Scattered similar experiments are still being implemented at the local (county and township) level.

A government adviser explained that the central government decided to suspend the reform out of alarm over the huge subsidies it was necessary to pay to keep local governments and rural education afloat. (Laurel Mittenthal)