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Chinese Farmers Escape Harvest Tax Paid for Centuries

Morning Edition, August 26, 2005 · From the central Chinese countryside, Rob Gifford reports that for the first time Chinese farmers are not paying a harvest tax. Beijing is lifting the tax to fight growing unrest in the countryside that in the past has brought on revolution.

Growth depends on making farmers well off
By Wu Qi (China Daily)
Updated: 2005-08-17 05:52


Zheng Chanzi, a farmer who lives in North China's Hebei Province, has many reasons to be pleased this summer.

While his family was busy harvesting wheat, which had grown better than in previous years, he heard the government had slashed the agriculture tax again and raised the selling price of grain by 60 per cent to 1.5 yuan (18 US cents) per kilogram.

"That means we earned several hundred yuan more from the summer harvest alone," said Zheng, who farms a plot of almost half a hectare.

For farmers, whose annual net income averages 2,900 yuan (US$358), this increase in income is by no means insignificant.

The Zhengs live in the village of Xijing on the North China Plain. Most households there survive by growing two crops a year - usually wheat in the summer and corn in the autumn.

They should all benefit from the tax break offered by the government, which is meant to make life better for rural families.

The move is significant to the large rural population in the country, which accounts for 70 per cent of China's total.

Farming initiatives

Agricultural reform started in 1970s featured a contracted responsibility system, which links income to household output, sparks farmers' enthusiasm and galvanizes the rural economy.

The second generation of the collective leadership of China, with Deng Xiaoping at the centre, promised not to change the system for 15 years. The third generation of leaders also committed to keeping the policy for another 30 years from 1997.

Thanks to a seriers of preferential policies, the summer grain harvest was 106.3 million tons this year, an increase of 5.1 million tons or 5.1 per cent from a year earlier, according to the National Bureau of Statistics. This year's early rice production also increased. This follows a bumper harvest in 2004, when grain production hit 469.5 million tons - 38.8 million tons or 9 per cent more than the previous year - the quickest-ever annual growth.

To further lighten the financial burden on farmers, the government has efficiently reformed the rural taxation system.

China began levying an agricultural tax in 1958, and has remained one of the few nations to do so. Before the introduction of reforms the tariff brought in 50 billion yuan (US$6.2 billion) or 3 per cent of the nation's total annual tax revenue.

In 2000, China launched experimental reforms of the rural tax and fee systems in East China's Anhui Province, in an effort to reduce the tax burden on farmers and eliminate growing administrative fees.

This year, as nearly 90 per cent of China's provinces and autonomous regions have abolished agriculture tax, revenue is expected to be just 1.5 billion yuan (US$185 million), down 93 per cent on last year. In 2006, rural residents who numbered 757 million last year will be exempted from agriculture tax, three years ahead of schedule.

Experts say the lifting of agricultural taxes will not affect fiscal stability, and will greatly help rural development.

To encourage grain production, the government has increased direct subsidies to growers in 800 major grain-producing counties across the country by 10 per cent this year.

According to Zhu Zhigang, vice-minister of finance, the funds will be granted in proportion to the counties' grain acreage and output. Money may be spent on agricultural development programmes, technological innovation, education, culture, public health and any other field as long as it boosts the economy and raises the quality of living.

In 2004, China granted 11.6 billion yuan (US$1.4 billion) in direct subsidies to 600 million farmers in 29 provinces, autonomous regions and municipalities - a move that "made at least 98 per cent of farmers content and happy," said Zhu, citing a survey conducted by his ministry.

Farmland protection

Extensive expressways and expanding enterprises have driven some farmers from their land, as the process of industrialization and urbanization accelerates.

Statistics show more than 20 million farmers have been relocated from their land in the past 13 years due to land requisition.

From 1996 to 2004, China's arable land shrank from 130 million hectares to 122 million hectares, reducing the per capita acreage to just 0.09 hectare. During that period the population has been growing by an average of 10 million annually.

China has to feed 22 per cent of the world's population with less than 7 per cent of the arable land.

This serious situation has forced the government to act tough. In April 2004 the State Council halted the granting of farmland for other uses for six months and started to rectify national land market imbalances.

Special teams organized by seven departments under the State Council were sent to various localities to find out if policies were having the desired effect and to warn of severe punishment for breaking the rules.

The State Council has issued three circulars urging better protection of crop land.

Balanced development

Despite an overall improvement in farmers' lives over the past few decades, the widening income gap between farmers and city dwellers constitutes a massive challenge to economic and social development - and is one of the root causes of social disharmony.

Statistics from last year show the average annual disposable income of urban residents is more than three times that of farmers. Annual income in the cities averages more than US$1,000, versus US$360 in the fields.

There are still 90 million people living on an annual per capita net income at or below US$105, the national poverty line.

Farmers' weak purchasing power has become a drag on the economy, which is yet to fully recover from lingering deflation. The government has responded by elevating the average rural education and training level. This has long been regarded as one of the main factors contributing to poverty in rural and mountainous areas.

Several years ago the poverty-reduction drive simply provided money and supplies for farmers.

"Practice has shown that just providing funds is not effective in helping farmers completely shake off poverty," says Professor Gong Weibin, an agricultural expert at China's National School of Administration.

"Needy farmers can really find a way to self-development after they possess the ability to make a living on their own," Gong said.

The government is determined to make farmers' reliance on a formal social security system, rather than their land.

So far 52 million farmers have joined the rural old-age insurance system, and 2.2 million have received pensions.

More than 80 million farmers had participated in the rural co-operative medical service system by the end of 2004, and 12.6 million had drawn allowances guaranteeing the minimum living standard.

Experts believe the government, in its effort to build a harmonious society, must bring farmers into the social security system, which is a prerequisite of stability and will help China advance from an agriculture country to an industrialized nation.

(China Daily 08/17/2005 page5)


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