China:  New Opportunities – New Challenges

While the world has watched transfixed over the last several weeks as the U.S. Stock market engaged in wide gut churning swings and as banks teetered and sometimes crashed, much has continued to happen in China in a much lower key manner that ultimately may have longer term implications.

This change with respect to rural treatment has been coming for some time.  In January 2006, the Chinese government abolished land taxes for all farmers.  This was a very momentous change as throughout the centuries of Chinese dynasties the farmer and his or her crops have always been a source of government tax and wealth.  This burden on rural families didn’t change in 1949 but in fact became even more pronounced.  The abolition of these taxes demonstrated that the government’s off spoken words on treating rural areas more fairly and encouraging a spread of wealth to the countryside was finally real and had substance.

In 2007, the government speeded up efforts in its “Go West” program to spread industrialization to the more rural West of China and to promote infrastructure development outside the Eastern coastal areas. 

In 2008, these efforts have speeded up yet again with the nation setting a goal of doubling per capita disposable income of rural residents by 2020 from the 2008 level.  This new goal came in an announcement of top official in Beijing on October 12, 2008.  The target was set at the close of the 3rd Plenary Session of the 17th Central Committee of the Communist Party of China (CPC), which focused on rural development.  The government body pledged to eliminate absolute poverty in rural areas by 2020.

Per capita rural disposable income in 2007 was 4,140 Yuan ($605).  This was a year-on-year gain of 9.5 percent in real terms.  A rise of at least 6 percent is expected in 2008 according to a government report issued in March 2008.  The rural population that is trapped in absolute poverty was reduced to 15 million last year, down from 250 million in 1978.   

Later in the month, the Communist Party of China (CPC) on Oct. 19 took a further step in promoting more rural prosperity by issuing a policy allowing farmers to “lease their contracted farmland or transfer their land-use right,” according to the Chinese Xinhua news agency. The policy, which is titled the “Decision on Major Issues Concerning the Advancement of Rural Reform and Development”, seeks to boost farms’ scale of operation for production and provide funds for farmers to start new businesses. The policy states markets for leasing contracted farmland and transferring farmland use rights will be set up and regulated so farmers can sub-contract, lease and exchange their land use rights or join shareholding entities with their farmland.

All of this is taking place in an environment that is increasing infrastructure in terms of roads, electrical access, etc. to rural areas.  Although the impoverished state of China’s rural areas remains a major concern of China’s central government and of international development agencies, the above steps are substantial and seem to demonstrate a real will to improve rural conditions in fundamental ways not seen in the past.

These changes are not only important to China but are important to the world as increasing the relative prosperity and opportunities for China’s farmers and rural families could help to build another broader engine of consumer demand that could be important to China’s own stability and prosperity but also to neighboring and other economic powers looking to share in China’s development.

Much remains to be done, but the entire world should note these developments and applaud the changes they are creating.

About the Author:

Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com)

Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations. Mr. Runckel is one of only two non-Ambassadors to receive this award in the 200-year history of the U.S. diplomatic service.


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