The Fat Lady Sings in China’s Opera of Reform
The communist leadership has been tiptoeing towards more enlightened policies for some time. After decades of neglect, Beijing has quintupled spending in the “New Socialist Countryside”, abolished rural income tax and cut school fees, subsidised grain production and attempted rudimentary health insurance. But the root of rural poverty was the purblind refusal to let farmers own the tiny plots they till. Last year, when the party granted city dwellers firm property rights on long leases, the rural masses were explicitly excluded.
The big difference now is the urgency of increasing domestic consumption to counter the loss of foreign customers, as recession deepens. How hard China is being hit by global economic turbulence is hard to assess, because owners are more likely simply to padlock factory gates than to go through bureaucratic bankruptcy proceedings; but evidence points to 67,000 companies closed, some 20 million manufacturing jobs lost, a simultaneous sag in real estate prices and the construction industry – and worse certain to come.
Urban woes have concentrated minds on the need to release pent-up demand in the countryside, where 740 million Chinese subsist on around £1 a day. With larger farms, access to credit and mechanisation, China could rapidly increase farm output and rural incomes, boosting rural demand for urban manufactures. That has become China’s No1 economic and political challenge.