Wednesday, December 14, 2005

Dear Readers, I am sure many of you have heard about the Dongzhou Massacre already. There is a lot of media hype about why it happened. How serious is the problem? I attach some commentaries I jotted down after a private-sector round-table I attended recently, as well as Willy Lam's latest editorial on the AWSJ.

Shih: Overall, I think the pressure for rural unrests has diminished compared with five years ago. There was a time in the mid to late 90s after the 1994 tax restructuring when the centralization of revenue put many local governments (especially at the county and township level) in dire straits. There are many stories of extremely harsh tax collection targets at the township level and serious wage arrears (often for over a year) at the county and township level. High tax collection targets forced many township officials to employ “irregular” means to collect taxes from farmers, often leading to bloodshed. Otherwise, the provision of public goods collapsed in many localities.

Since 1999, the central government has greatly increased transfer payments to the local level to alleviate some of this stress. Overall, the regime will boost transfers to rural areas in the next few years (from 120 billion RMB this year to over 500 b RMB in five years).As far as we can tell, it is having generally positive effects in local fiscal situation and local provision of public goods. The fiscal transfer system itself has improved. In my research, I found that while central transfers to county used to be regressive (more money to rich counties) in 1993, it was neutral by 2000 (both rich and poor counties had equal chance of getting transfers). This is the result of increasing categories of central transfers focused on the rural area (education, salaries for local officials, poverty alleviation…etc.). True, not all of this transfer is used for intended purposes. My research shows that roughly half of the transfers are siphoned off to pay for wages and bonuses for local officials, but the other half is generally used for the intended purposes.

The big improvement came in 2001 with the tax-for-fee reform which eliminated most categories of extra fees that local governments were levying on farmers. This year, even regular agriculture tax was abolished. Since the Wen Administration has made burden alleviation a high priority, local governments are in general complying with these policies. My coauthor and I traveled to some 15 counties around China and found near uniform compliance to these edicts.

The problem is that central transfers are insufficient to fulfill the revenue appetite of local governments, and they have found inventive ways to raise extra revenue. Two main channels to raise money include school fees and land confiscation. School fees in many areas have grown to equivalent to one or even two times that of the average income of a farming household. The administration is aware of this problem and is trying to deal with this with more transfers for education. The more salient problem is the problem of land confiscation which is more prevalent in relatively affluent areas, where land is more valuable. Since farmers have no property rights over land, the local government can legally take farm land and redistrict it to industrial or commercial real estate at little cost. It has become a favorite way of raising revenue for middle-income and some rich counties. This has led to extremely violent confrontation between fairly well-off farmers and the local government. The clashes are especially violent because these farmers often have some means of defending themselves and they know the true value of the land they occupy.

The political implication of all of this is that while the pressure for rural instability will lower in the next few years, we will witness incidents of extremely violent confrontations between farmers whose land has been confiscated and the local government. We recently witnessed such an episode in Guangdong province.



China's Spiraling Unrest
December 14, 2005

The ugly incident of police firing on unarmed peasants in the southern Chinese village of Dongzhou suggests that the nation's spiraling rural unrest has reached the point where the Beijing leadership is in danger of losing control of vast tracts of the countryside. And that it feels left with no choice but to turn a blind eye -- or even actively connive -- in the use of brute force to silence dispossessed peasants.

The cause of the Dec. 6 unrest is a familiar one in today's China. Peasants evicted from their land without proper compensation, in this case to make way for a power plant which developers, acting in collusion with local cadres, wanted to build in the agricultural and fishing village of Dongzhou, only a short drive away from Hong Kong. After their repeated attempts to petition county and provincial authorities fell on deaf ears, the peasants resorted to a nonviolent protest. Security forces responded with tear gas and then, when they still refused to disperse, gunfire a few hours later -- killing tens of villagers according to eyewitnesses. There followed several days of white terror, as police cordoned off the area, searched every house, and took away the alleged "ringleaders." It wasn't until last Saturday that the official media admitted anything had happened in the village. The official New China News Agency claimed it was a "serious crime" caused by "a very small number of instigators," and that only three villagers were killed "by mistake."

The violence comes amid evidence of a further steep rise in the number of riots, demonstrations, and other instances of civil unrest this year. The Ministry of Public Security admits that there were 74,000 "mass incidents" in 2004; and academics in Beijing familiar with rural problems say that the number of confrontations between peasants and police has continued to increase since then.

Aware of the scale of the problem, Chinese President Hu Jintao and Premier Wen Jiabao have taken some initial steps to try and address rural grievances. Agrarian taxes are being abolished. New regulations are being drafted to allow peasants to migrate to and seek work in the cities. The centuries-old petition system, whereby penniless peasants trek thousands of miles to present their grievances to mandarins in provincial capitals and even Beijing, has been overhauled. Indeed the leadership has given specific instructions that the petitioners not be ill-treated -- and that the police and courts investigate their complaints thoroughly.

But no attempt has been made to seriously address the most common cause of complaints, the expropriation of large plots of land and displacement of tens of thousands of residents. Property developers as well as owners of mines, oilfields and hydroelectric stations find it easy to bully peasants, most of whom are poorly educated and have no recourse to legal help. One of the most explosive peasant uprisings last year took place in northern Sichuan Province, where tens of thousands of farmers clashed with police over the damming of the famous Dadu River for the purpose of constructing a hydroelectric facility. Again, the lowly peasants were no match for a coalition of local officials and power monopolies, in many cases run by retired senior cadres and children of senior leaders.

Despite their lip service to policies such as "putting people first" and "building a harmonious society," the Hu-Wen leadership are -- at the very least -- turning a blind eye to the scheming of such powerful local interests all over China. For example, the bulk of the coal mines -- in whose inhumane bowels at least 6,000 miners perish every year -- are run by networks of regional cadres, "red" entrepreneurs and financiers, local triad bosses, as well as the police and paramilitary officers. This explains why, as the recent peasant protest in Taishi village in Guangdong province, illustrated, officials can easily call upon armies of thugs to beat up demonstrators -- as well as Chinese and foreign reporters covering the scandals.

Even more disturbing, the killings in Dongzhou raise the possibility that the Hu-Wen leadership has gone beyond turning a blind eye to local grievances and is now willing to actively connive in their suppression. Alarmed by the recent series of "velvet revolutions" in neighboring Central Asian nations such as Kyrgyzstan, Beijing has begun taking a tougher stance against anyone deemed a threat to the Communist regime. That includes not only Internet users and nongovernmental organizations, but even peasants who have themselves been the victims of exploitation.

After all, President Hu, as an obedient student of Chairman Mao Zedong, is sure to be familiar with one of the Great Helmsman's most famous sayings: "A spark from heaven can set the whole plain ablaze." So rather than run the risk of the wrath of isolated villages coalescing, and turning the entire countryside into a ball of fire that would topple the leadership from power, the Hu-Wen team would rather err on the side of "caution" -- even when that involves aiding and abetting instances of local tyranny.

Mr. Lam is a veteran China scholar and journalist specializing in party politics and foreign affairs.

One question I have. Why Guangdong? Is it because it is close to Hong Kong and Western media, or is there something odd about the Guangdong provincial government that causes these sorts of outbreaks? I have read that Guangdong has been notably less enthusiatic about local elections than other provinces such as Zhejiang, but that information may be dated.

Joseph Wang
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