Rural Poor Aren't Sharing In Spoils of China's Changes

Wang Huazhong says farmers are being cheated out of higher prices for their crops because they have no bargaining power with middlemen.
Wang Huazhong says farmers are being cheated out of higher prices for their crops because they have no bargaining power with middlemen. (By Peter S. Goodman -- The Washington Post)
By Peter S. Goodman
Washington Post Foreign Service
Tuesday, July 12, 2005

SANBAIHU VILLAGE, China -- The China that Wang Huazhong glimpses on television is in the midst of an amazing transformation. In cities he has never visited, skyscrapers tower over highways choked with cars, and people jam glass-fronted malls buying up jewelry and luggage simply to pass the time.

Here in his village in the country's northwest, Wang sees the same desiccated landscape that has changed little in his 46 years. A rutted dirt track winds through treeless mountains to the county seat 30 miles away, the outermost boundary of his experience. Watermelon plants emerge reluctantly from chalky soil, waiting for rain that may never come. A wood stove occupies his mud floor, painting his walls with soot.

But Wang's world is far from cocooned from the larger forces shaping his country's fortunes: In the 3 1/2 years since China entered the World Trade Organization, aggressive industrialization combined with an outpouring of consumption has jacked up prices for everything from fertilizer to transportation, roughly doubling the average cost of living here.

Those within reach of China's booming coastal cities have been compensated with new opportunities that have lifted millions out of poverty, such as factory jobs making goods for export and cash markets for fruit and vegetables. But that upside remains beyond this rural community and thousands of others like it across this still predominantly peasant country. The costs of buying food and growing watermelon have climbed faster than what Wang receives for his crop. His household income has slipped by 20 percent over the past five years, to about $300 per year.

"Our lives are more and more difficult," Wang said, as his donkey probed the soil near the family outhouse for stray wheat. "Every year, it gets harder."

A recent study conducted by the World Bank found that incomes among rural Chinese -- about three-fourths of the total population -- have declined slightly in the years since China entered the WTO, while urban residents have enjoyed modest gains.

Economists say this trend underscores the downside of globalization: While free trade has proved highly efficient in generating wealth, it has failed to share the spoils, intensifying gaps between rich and poor, urban and rural. In many instances, new wealth is coming at the direct expense of the poor as local governments sell off land for development projects.

"Industrial companies gain the profits while rural people lose their basic materials of livelihood," said Wen Tiejun, dean of the School of Agricultural Economics and Rural Development at People's University in Beijing.

In China, the divide between rich and poor is greater than before the peasant-led revolution that brought the Communist Party to power in 1949. Last month, China's government announced that the income gap had widened in the first three months of the year, with the richest 10 percent of the population controlling 45 percent of the country's wealth and the poorest 10th holding little more than 1 percent, according to the official New China News Agency.

In Beijing, concern mounts that the rural poor are falling so far behind as to challenge the legitimacy of the party. Demonstrations have become near-daily occurrences as farmers protest loss of land to development and excessive taxation. In response, the central government has rolled back taxes on peasants.

Last year, China's State Council, the equivalent of a cabinet, released an official document outlining a strategy aimed at closing the rural-urban income gap, including tax cuts for farmers and development funds aimed at stimulating business in poor areas. President Hu Jintao and Premier Wen Jiabao are frequently quoted in the state press pledging to alleviate village poverty.

Some worry that rural poverty is a potential threat to the overall economy. China is beset by a surplus of production, as over-exuberant investment erects too many factories making more goods than the country needs. Policymakers are banking on domestic consumption to absorb the surplus.

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