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China Pledges Rural Reforms to Boost Incomes, Consumption

By Bloomberg News
December 24, 2012 4:08 AM EST 3 Comments
A farmer works in a field in Pinggu, on the outskirts of Beijing.
Photographer: Tomohiro Ohsumi/Bloomberg
A farmer works in a field in Pinggu, on the outskirts of Beijing.

China said it will better protect farmers’ land rights and boost rural incomes and public services to help narrow the divide with urban areas.

The government will increase agricultural subsidies and ensure “reasonable returns” from planting crops, the official Xinhua news agency reported on Dec. 22, citing an annual work conference to set rural policy.

The goals, which include increasing rural incomes by at least as much as those in urban areas, reflect a new leadership’s focus on reforming the land system and addressing wealth disparities as it encourages migration into towns and cities to boost consumption. Li Keqiang, set to take over from Wen Jiabao as premier in March, is championing urbanization as a growth engine.

“A completely new policy approach is emerging under Li Keqiang,” said Yuan Gangming, a researcher in Beijing with the Chinese Academy of Social Sciences. “It’s about giving farmers a bigger share from land deals, it’s about changing local governments’ reliance on revenues from land, and it’s ultimately about a fairer system of sharing China’s economic growth.”

Yuan said he expects the government to be appointed in March to announce “a slew of policy initiatives” from changes to the household registration, or hukou, system to trading in land-use rights as part of Li’s urbanization drive.

The Shanghai Composite Index closed up 0.3 percent. Some Asian markets are closed today, while trading hours are restricted in some others.

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Li, currently a vice premier, became No. 2 in the standing committee of the Politburo, the Communist Party’s highest ruling body, in a once-a-decade transfer of power in Beijing last month. At the meeting, outgoing General Secretary Hu Jintao said the party aimed to “give more to farmers, take less from them” and resolving farmers’ issues is the “number one priority.”

Land grievances have sparked thousands of protests across the nation, posing one of the most serious challenges to the party. Residents in the southern village of Wukan grabbed world attention last year when they forced local politicians out of office over a land grab.

About 43 percent of villages in China have experienced land appropriations since the 1990s and land disputes are the leading cause of social unrest, according to Xiaohui Wu, a land-tenure specialist at Landesa, a Seattle-based group that studies global land issues.

The party last month pledged to narrow the divide between rich and poor and urban and rural areas. The nation’s wealth gap is 50 percent higher than a risk level for social unrest, according to a central bank-backed survey published this month.

Outstanding Problem

Urban per capita disposable income in the first nine months of 2012 rose 13 percent to 18,427 yuan ($2,958), almost three times cash income of 6,778 yuan in rural areas, according to National Bureau of Statistics data.

“The most outstanding problem in our country’s social and economic system is still the separation of rural and urban China; and the most serious factor hindering China from building up a comprehensive well-off society is the excessively big gap between urban and rural development,” Xinhua said, citing the work conference.

The government will try to ensure that farmers who move to towns and cities receive the same treatment as urban residents, according to Xinhua.

‘Sustainable’ Growth

“In the past, urbanization in China was equal to property development,” Yuan from the Chinese Academy of Social Sciences said. “In the future, urbanization will focus on people. Then China’s economy can grow in a sustainable manner.”

At the annual central economic work conference earlier this month, policy makers signaled tolerance for a slower pace of growth with a pledge to seek a higher “quality and efficiency” of expansion next year.

The government has set an initial target for 2013 expansion of 7.5 percent, Bloomberg News reported on Dec. 18, citing two bank executives and a regulatory official briefed on the matter. The goal was lowered to 7.5 percent for 2012 from the 8 percent pace in place from 2005 through 2011. Growth has averaged 10.6 percent a year in the past decade.

Elsewhere in Asia today, Singapore reported the slowest inflation in two years. Consumer prices rose 3.6 percent in November from a year earlier, compared with 4 percent in October.

Vietnam’s economy expanded 5.03 percent in 2012, the slowest pace in 13 years, another release showed. Taiwan said industrial output increased the most in nine months in November.

In Israel, the central bank’s interest-rate decision is due at 5:30 p.m. local time, with eight of 23 analysts surveyed by Bloomberg News forecasting a quarter point cut to 1.75 percent. One sees a 50 basis-point reduction and the rest expect the rate to be held at 2 percent. Weakening inflation and gains in the shekel may have bolstered the case for a reduction.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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