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Commentary: Making farmers permanent urban residents
By Jia Hepeng (China Daily)
Updated: 2004-02-25 14:28

China's agricultural sector must undergo some basic restructuring, even though the central government has done much in recent years to lift hundreds of millions of farmers out of poverty.

Market-oriented reform - especially involving land transactions, private financing and the urban residential registration system - must be enhanced. At the same time, government support must be maintained to offset inadequacies in the market system in rural China.

The central government last Monday released its No 1 Document for this year, which recommended increased government spending in grain production, enhanced industrial restructuring, programs to train and protect migrant workers in cities, and reductions in various agricultural taxes.

All of those measures, if implemented, will benefit farmers. But some basic restructuring must occur.

For example, it is crucial that an ever-growing number of farmers, as soon as possible, become permanent urban residents.

Most economists agree the surplus of rural labourers - estimated at 180 million, and growing by 8 million a year - is the major issue in rural China.

China has more than 900 million farmers compared with 400 million urban residents.

The huge rural population keeps China's per capita income low, while increasing the burden on unemployment programs.

Statistics released last Monday indicate farmers' per capita income last year was 2,622 yuan (US$316.67), while urban residents' per capita income was 8,500 yuan (US$1,026.57).

China's huge rural population will overshadow anything done in the rural areas to improve farmers' incomes.

Any efforts to improve grain, vegetable and/or fruit output will greatly increase market supply in urban areas - Chinese farmers, because of their low wages, seldom buy fruit - and this will result in price cuts.

Lower prices will benefit urban residents, but will affect farmers' incomes.

The best solution, over the long term, is transforming China's farmers into urban residents and workers. That will also increase the number of urban consumers.

Last year, more than 99 million farmers worked in urban China as migrant workers, but they did not become permanent urban workers.

Several factors - including issues relating to their land and cities' policies not to consider them permanent residents - encouraged them to return to rural China.

Thus, the urban market did not expand significantly, and, as a result, agricultural output did not increase significantly.

Two simultaneous efforts - establishment of a free-market land-transaction system in the countryside and the lifting of all urban prejudicial policies against farmers - will enable current migrant workers to gradually become urban workers and consumers.

If those measures are implemented, many farmers, with the money from the sales of their properties as capital, will be able to move to the cities and start businesses.

Currently, however, China's farmers do not have this option because they do not own the rights to their property.

The State controls all rural land, even though it legally belongs to farmers' collectives, such as villages.

More, bolder efforts are needed to ensure farmers have the right to sell their land.

Meanwhile, cities' authorities should allow the free movement of farmers into their cities, and create affordable housing for them.

Apartments built for migrant workers can be small, and they can be located in the less-desirable areas. But the housing must be affordable. Government support, such as reduced property tax rate for buyers of these housing, is needed.

The stipulation in the document that arable land must be protected should not be interpreted as land transactions are banned.

Rather, it must be interpreted as a policy that encourages the concentration of agricultural land in the hands of the best farmers. That would result in increased, sector-wide efficiency.

After a free-market land-transaction system is implemented, the government must continue providing support to ensure buyers do not take advantage of poor, uneducated farmers.

The government should protect farmers' interests during land transactions, help farmers sell their land and provide training so they have the skills for non-agricultural work.

In other fields of rural development, such as the industrialization of agriculture, in which farmers plant for processing companies, farmers are at a disadvantage. Therefore, the government should provide farmers with the same support.

As more farmers leave rural China and the remaining, productive farmers have greater benefits, the situation will improve.

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