Once a Symbol of Power, Farming Now an Economic Drag in China (New York Times)

 

Li Haiwen, 47, grows medicinal plants, rather than grain, on the plot of land he rents from the local government in Yangling. “The more grain you plant,” he said, “the poorer you get.” Credit Gilles Sabrie for The New York Times

YANGLING, China — For about 4,000 years, farming in this region has been a touchstone of Chinese civilization. It was here that the mythic hero Hou Ji is said to have taught Chinese how to grow grain, and the area’s rich harvests underpinned China’s first dynasties, feeding officials and soldiers in the nearby imperial capital.

But nowadays, Yangling’s fields are in disarray. Frustrated by how little they earn, the ablest farmers have migrated to cities, hollowing out this rural district in the Chinese heartland. Left behind are people like Hui Zongchang, 74, who grows wheat and corn on a half-acre plot while his son works as a day laborer in the metropolis of Xi’an to the east.

Mr. Hui, still vigorous despite a stoop, said he makes next to no money from farming. He tills the earth as a kind of insurance. “What land will they farm if I don’t keep this going?” he said of his children. “Not everyone makes it in the city.”

Farm output remains high. But rural living standards have stagnated compared with the cities, and few in the countryside see their future there.The most recent figures show a threefold gap between urban and rural incomes, fueling discontent and helping to make China one of the most unequal societies in the world.

The nation’s Communist leaders have declared that fixing the countryside is crucial to maintaining social stability. Last year, they unveiled a new blueprint for economic reform with agricultural policy as a centerpiece. But the challenge confronting them resembles a tangled knot.

It begins with the fact that farms in China are too small to generate large profits, about 1.6 acres on average, compared with 400 acres in the United States. Yet it is difficult to consolidate these farms into larger, more efficient operations because Chinese farmers do not own their plots — they lease them from the government.

Privatizing farmland would allow market forces to create bigger farms. But that would be a political minefield for the Communist Party. It would also risk exacerbating inequality, by concentrating land ownership in the hands of a few while leaving many rural families without farms to fall back on if they hit hard times in the cities.

“All of these issues are interlocked and require a series of reforms to be solved,” said Luo Jianchao, a professor at Northwest A & F University in Yangling, and a government adviser. “There’s no magic bullet.”

In late September, President Xi Jinping endorsed an experiment underway in Yangling and other parts of China to untangle this knot. The measure, called liuzhuan, stops short of privatization but gives farmers land-use rights that they can transfer to others in exchange for a rental fee.

The goal is to simulate a private land market and allow China’s family-run, labor-intensive farms to change hands and be amalgamated into large-scale, industrialized businesses. In theory, liuzhuan allows this to happen without cutting ties between rural families and the land, because they collect rental fees as a safety net.

Mr. Xi has presented the policy as critical to China’s next phase of economic reform. Skeptics, however, say it shows the government remains unwilling to consider a bold measure that has worked in many countries: giving farmers full ownership of their land.

“Privatization of land is a key issue but it’s completely taboo,” said Tao Ran, an agricultural expert at Renmin University in Beijing. The party leadership, he said, “cannot countenance it.”

More is at stake than the socialist credentials of the Communist Party, which came to power in a peasant revolution in 1949 and immediately collectivized farmland. State ownership of land is also a major source of government revenue. In areas near cities, local officials often rezone agricultural land and flip it to developers at a huge premium, sometimes setting off violent protests by residents who are left out.

Others see the system of political control of the countryside at stake. “The rural system they’ve had since the 1950s is based on the state ownership of land,” said Fred Gale, who writes an influential blog on China’s agricultural sector called Dim Sums. “If this unravels, then the bureaucrats would be at a loss as to how to manage the countryside.”

In Yangling, a district of 155,000 people that has been a center for agricultural sciences since the 1930s, several problems with the government’s attempt to sidestep privatization are apparent.

Because farmers do not own their land, they cannot sell it and get a large, lump sum payment that could be used to make a new start. Nor can they mortgage land for funds that could be reinvested in their farms or in other businesses.

Yang Tewang, a branch manager of the state-run Yangling Rural Commercial Bank, said he has made about $3 million in mortgage-style loans since the liuzhuan experiment began. But he said they were not true mortgages since the banks cannot repossess land if the farmer defaults — the state owns the land, not the farmer. As a result, Mr. Yang said he minimizes risk by lending only to large-scale vegetable and fruit farmers.

“The rest don’t pay,” he said. A grain farmer, for example, could never get a loan, he said.

Another problem has been figuring out how to set the rental fees that rural families collect if they transfer their land-use rights.

Yangling set up a land bank that took over land-use rights in an area of 36 square miles, then set an annual rental fee of at least $750 per acre of land. Farmers could choose between giving up their land and collecting that rent, or leasing their land back from the state and continuing to farm.

But the fees can distort the market. For example, they have discouraged production of grain, which does not sell for enough of a margin over the cost of renting the land. Grain pays only about $1,250 per acre, for an annual profit of about $500, said one resident, Li Haiwen.

“The more grain you plant,” he said, “the poorer you get.”

Mr. Li grows magnolia bushes used in traditional Chinese medicine instead. But he said farming is just a sideline for him. His main source of income is in professional landscaping. “I think our minds are opening up and we realize there are other ways to make money,” he said.

Exactly why rental prices are so high is open to debate. In some parts of China, rents are even higher than in Yangling, topping $1,200 per acre. By contrast, the average acre of farmland in the United States rented for $136 in 2013, according to the United States Department of Agriculture. Some experts say the rental fees have been driven up by the same sort of speculation that has made apartments so exorbitantly expensive in Chinese cities. Even in a remote area like Yangling, an apartment of 1,000 square feet sells for $50,000, and in cities like Beijing the price can easily be 10 times that.

In recent months, banks like the China International Trust and Investment Corporation have been buying rural land-use rights at high prices. Li Ping, an agricultural expert at Landesa, a nongovernmental organization focused on rural issues, said he believed the purchases have been made with an eye toward rezoning land for housing or industrial use.

“It’s like the housing prices here being higher than in most parts of the U.S.,” Mr. Li said. “It’s not sustainable.”

One of the success stories in Yangling has been the case of Zhang Hongli, who took over 197 acres once farmed by three villages and pays about $150,000 per year in rental fees.

Mr. Yang, the banker, described it as a win-win exchange. Mr. Zhang uses the land to grow watermelons, which sell for a nice profit in Xi’an. Meanwhile, the families who gave up their land are collecting about $500 per year on average, and almost all received free apartments from the government as well.

Government planners hope that more farmers will be moved to the cities so the countryside gradually depopulates and ever-larger-scale farming takes over. For farmers with a job already lined up in the city, this system is attractive. But for people still wanting to work the land, like Zhou Yuansheng, 66, it is an example of how little say he has.

“The big decisions are made by the government,” he said. “No one asked me what I wanted to do with my land.”

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