Breaking Through the Obstacles to Development – Zhou Tianyong

Below is China analyst David Cowhig’s translation of a chapter from Zhou Tianyong’s Breaking Through the Obstacles to Development (Á™ÅÁ†¥Âèë±ïÁöщΩìÂà∂ÊÄßÈöúÁ¢ç). This book was mentioned in Beijing takes on local-government mafias from Asia Times:

Over the past several years, peasant incomes have slowly increased but consumption in rural China has been weak. While on the macroeconomic scale there has been accumulation, investment and consumption are seriously out of equilibrium. In response, some scholars and government departments have made suggestions such as increasing investment in the villages, which certainly makes sense. However, I believe that the key to increasing peasant incomes and increasing consumption in the villages is to recognize and vigorously protect the various rights of peasants.

The full translation is below. Thanks to David Cowhig for sending it to CDT.

Chapter One of Breaking Through the Obstacles to Development [突破发展的体制性障碍] Guangzhou, 2005, 广东经济出版社

ISBN 7-80677-891-8. pp. 2 – 6.

To Increase Peasant Incomes Which is More Important, Boosting Funding or Rights?

By Zhou Tianyong, Vice Director of Research, Chinese Communist Party Central Party School

Over the past several years, peasant incomes have slowly increased but consumption in rural China has been weak. While on the macroeconomic scale there has been accumulation, investment and consumption are seriously out of equilibrium. In response, some scholars and government departments have made suggestions such as increasing investment in the villages, which certainly makes sense. However, I believe that the key to increasing peasant incomes and increasing consumption in the villages is to recognize and vigorously protect the various rights of peasants.

Peasant Land Rights

In the villages, land is the peasant’s greatest wealth and most productive asset. However from the beginning of reform to 2003, various construction projects throughout China had taken about 100 million mu (16 million acres) of agricultural land from production. Calculating at an average market price of 50,000 RMB per mu, that comes to 5 trillion RMB but peasants only received 500 billion RMB in compensation. Village lands are collectively owned by villagers so the remaining 4.5 trillion RMB should also have gone to the peasants. However, this money became instead a windfall profit for the treasuries of various levels of government or of real estate developers.

In effect, the peasants provided land capital accumulation to promote urbanization but they did not themselves benefit from industrialization and urbanization. Considering this problem with current land prices in mind, each mu is worth nearly 100,000 RMB and about 3 million mu (500,000 acres) of agricultural land are taken for development each year so the total value of land taken each year comes to 3 trillion RMB. This equals the amount of money 100 million migrant workers send home or take home each year.

Therefore, I suggest strengthening the land rights of the peasants and increase the length of land contracts to 100 years. Land under contract is not to be taken but is to be handled through the real estate market. When large profits are taken from a land sale, the government can assess a reasonable value added tax. In order to reduce the costs of economic development and for the sake of the long-term interests of the peasants, I suggest that land enter the real estate market as land held jointly by stock and be rented rather than sold. Profits from the land should be used for pensions and social security for the peasants. I estimate that strengthening the land rights of the peasants would increase annual peasant income by at least 30 billion RMB annually.

Wage Rights of Peasants Who Go to Work in the City

My personal estimate is that various construction projects throughout China have a cumulative debt of about 1 trillion RMB. Of this debt, over 300 billion RMB in back wages are owed to migrant workers. Owing to the great surplus of labor on the labor market, the poor education and poor awareness of the law on the part of migrant workers, only 50% signed a labor contract. This makes their situation even more difficult. The work the central government began in late 2003 to get these debts to migrant workers repaid is very timely and correct. Some departments estimate that 90% of the 2003 debt has already been cleared. After have done my own survey, it seems that I am unable to be so optimistic.

In order to ensure that migrant workers get paid after doing their work, the key measures to take are:

1. When the upper levels of Development and Economic Reform Commissions reform the investment approvals process, they need to clamp down on projects for which there is no money or for which the fiscal authorities will be unable to repay loans. This will ensure that each level of government will not betray the trust of the migrant workers when it comes time to pay their wages.

2. Migrant workers going to the city to find work should be given a basic education about wage contracts so as to increase their awareness of their rights.

3. Establish a system to audit budgets and capital, put a stop to companies that carry out residential construction projects without capital and evaluate companies doing developments.

4. Create a system for warning, implementation and monitoring migrant worker contracts and the payment of wages.

5. Strike against the improper deduction and nonpayment of worker wages by residential development companies and labor bosses who get workers. The courts and legal departments should help workers get their wages, taking the actual fact of work performed as evidence that wages need to be paid.

6. Labor courts, lawyers, public security, the courts and other organizations should constitute a system for protecting the migrant workers rights in employment, wages etc. Policy and the law should be oriented towards protecting the rights of migrant workers.

This should be done in order to implement and make perfect the labor and wage rights of peasants going to the city to work and to ensure that what is very likely a debt of 30 – 50 billion RMB owed to the migrant workers each year ends up in their hands.

The Right of the Peasants to Refuse to Pay Arbitrary Fees

China has 2700 counties, 40,000 rural districts (xiang), and 730,000 villages. According to a sampling survey, the treasury and other financial resources of a county supports on average 12,000 people (including teachers at township schools supported by the county). A township supports about 100 people in its various offices. If we are to use an average personnel cost of 15,000 RMB at the county level, 10,000 RMB at the township level and 6000 RMB at the village level, the annual personnel costs alone for all the counties, townships and villages of China comes to 569.8 billion RMB. If we add 20% for entertainment and office expenses, we reach 683.8 billion RMB. This does not include 200 billion RMB for constructing and maintaining office buildings, training centers, and other urban infrastructure. Only 5.5% of the 800 million people who live in China’s villages “eat the Emperor’s rice” at the county, township or village level. However there consumption comes to 42.7% of the 1.6 trillion RMB produced by agriculture or in China’s villages in 2002.

If the average funding available to the finance department of each county (including transfers from higher levels of government) is 150 million RMB, then the funds that the county finance department has a 50% shortfall in the money it needs to cover personnel, actual administrative and construction expenses. Therefore we can conclude that the total income of the counties, townships and village collect off budget is about 400 billion RMB. Excluding the portion paid by enterprises and individual entrepreneurs, we estimate that the various fees collected from the peasants come to 150 billion to 200 billion RMB.

Why are there so many offices such as the land office, water conservancy office and family planning office could be set up without a budget? How is it that so many county and township offices such as the Industrial and Commercial Bureau, Public Security, and Quality Inspection Bureau can operate normally with an inadequate budget? Moreover there are more and more of these offices and more and more people eating the Emperor’s rice. That is because each level of people’s congress and government gives them the right to collect fees but peasants don’t have the right those arbitrary fees that are not reasonable or against a law or a regulation?

I suggest that:

1. Peasants have the right to refuse to pay any fee other than taxes from a government or government department. The courts and government should support the right of peasants to refuse to pay fees.

2. Repeal all unreasonable laws and regulations that require peasants to pay fees.

3. Accelerate the convert fees into taxes reform and promulgate regulations that arbitrary collection of fees is illegal.

4. Reduce the size and reform county, township and village government and organization. The ability of the peasants to resist paying fees must be strengthened. Payrolls must be slashed in order to force staffing cuts and transfers to personnel elsewhere and to force the many offices to shrink and reorganize.

5. Make firmer the organization of county and township administration and of the budget and positions for people who eat the emperor’s rice. Eliminate the policy that provides inadequate budget support but fee collecting authority that results in the increase in the number of organizations and the number of people on the government payroll.

Migrant Workers Going to the City Should Have Retirement Pensions and Other Social Security Rights

During the last four decades of economic development, we have given the tens of millions of urban workers nearly no social security. The money that should have been spent on social security was spent on construction and economic development. This has left for us very serious economic and social problems. Today we need to use the social security payments for the next two generations to support the social security costs of the last two generations. The economy and the sustainable development of society could be greatly affected. To make a conservative estimate, over the next ten years there will be a shortfall of about 4 trillion RMB in social security funding. Moreover, there are tens of millions of employees of township authorities and government-related enterprises (shiye danwei) who have not yet been enrolled in a social security system. The 100 million migrant workers have for all practical purposes not entered into the social security system. Moreover, by 2020, there will be an additional 200 million peasants who have entered the cities. Imagine the consequences if a social security system were not to be established in a timely manner for these 300 million urban workers and migrant workers! As these workers gradually reach retirement age, social will have far worse social and economic problems than it has today.

The Third Session of the Sixteenth Congress of the Chinese Communist Party stated that peasants who go to the city to work have all the rights of urban workers in that same industry, including social security rights. That is the correct policy. If 10% of the wages of migrant workers who come to the city is set aside for social security, 100 million migrant workers would pay 80 billion RMB each year into a pension fund. Over the long term, with 200 million peasants moving to the cities over the next twenty years, the establishment of a social security that includes a migrant worker pension fund and other protections will be able to provide from several tens of billions to several hundreds of billions of RMB in pension income each year.

The various topics discussed above, if the work of acknowledging and protecting the various rights of the peasants is accomplished properly, the peasants will gain 50 billion to 100 billion RMB in income each year. Therefore my viewpoints and suggestions are:

1. Recognize, respect and protect the rights and legitimate interests of peasants as citizens to land, employment, wages, and pensions as well as their right to resist efforts by counties, townships and villages to collect arbitrary fees. In fact, the income that peasants gain from their rights being respected will be far greater than any subsidy that could be provided to them from the state treasury. Therefore, giving great attention to the expanded scope of the legitimate interests of the peasants to the work needed to protect those legitimate interests is more important than giving peasants state subsidies. It needs to be carefully thought out and implemented completely.

2. In recent years, some sectors of the economy became overheated. The main cause for that is government-sponsored projects and other schemes that take advantage of land purchased at too low a price, of misappropriated wages of migrant workers, of the failure to give migrant workers social security, and of governments carrying out projects with no money or borrowed money. To a certain extent, the economy developed on the back of peasants whose rights had been violated. The rapid expansion in investment, the slow increase in consumption and the imbalance between savings and consumption, and especially the low demand in China’s villages are symptoms of this. Therefore, respecting and actively protecting the various rights and legitimate interests of the peasants is an important macroeconomic control strategy and policy to restrain government investment and the overheating of the economy, to stimulate demand, and the restore the balance between savings and consumption.

3. Strike the right balance between speed and stability. Reforming the land system, ensuring that construction projects pay migrant workers, and giving social security to peasants will have a definite effect on the pace of economic growth. However, from the standpoint of the social responsibility of the Party and the government, the rights and legitimate interests of the peasants must be protected. The livelihood and social security needs of landless peasants must be adequately resolved. Migrant workers in the societies should get social security. And the migrant workers in the city should be paid the wages due to them. If this does not happen, Chinese society will be unstable today and tomorrow. Society cannot be calm because a social security system has not yet been established. From this perspective, we can certainly refuse to develop our economy on the backs of peasants whose rights have been violated. We can develop our economy a little more slowly and at the same time ensure economic and social stability and healthy development so that the people, and in particularly the peasants, can share in the benefits of industrialization and urbanization.

February 19, 2006 6:13 PM
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