China peasantry

Who should own China’s land and who should farm it remain the central questions of China’s five-thousand year-old civilization

Leave a Comment / May 21, 2014

 

 

 

Qing porcelain

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When I first came to China 33 years ago, 80% of China’s population was rural, mainly small-scale peasant farmers. Today, half the 1.3 billion population is off the farm, living in cities. Two obvious results: China is over twenty times richer per capita in dollar terms. And, from a country with a handful of major cities three decades ago, China now has 160 cities with a population of at least one million.

The Chinese government’s plan is for another 150 million Chinese to go from farm to city in the next decade. But even then, there would still be as many as 300mn too many people living in rural villages. China, according to reliable estimates I’ve seen,  could be efficiently farmed by as few as 100mn full-time farmers, or 7% of the total population. In the US, less than 2% of the population works on farms. They live well. A farming family in the US now earns on average $108,000, 53% above the national household average.

In China, peasants earn on average one-third as much as urban Chinese.  As peasant numbers decline, the incomes rise of those remaining. A depopulating countryside, however, won’t directly solve rural China’s age-old problem: farm plots are too small and often on uneven terrain. This limits the use of farm machinery and modern farming methods. Farm yields remain stubbornly below US and European levels. This, in turn, means food imports must rise inexorably. Year by year, China moves farther away from an often-expressed goal to increase its food self-sufficiency.

The solutions aren’t hard to formulate. China needs fewer and bigger farms with more leveled ground to permit efficient mechanization. But, achieving this remains, for now, all but impossible. Part of the problem is that all rural land in China is owned by the state, so there’s no way for peasants to buy land from one another. A larger problem is the adverse impact this would likely have on Chinese society.

China’s describes itself, even today, as a 农业大国, “nongye daguo“, or  “agricultural great power”. This is in some sense an artifact of history. But, it also reflects a deeper reality, that most Chinese, even the most thoroughly urban, still have some concrete connection to village China. Often this is through extended family members still engaged in peasant farming.

More directly, many people living in cities — if not the majority than close to it — still hold rural “hukou” and so generally have an entitlement to farm a plot of land in their ancestral village. This hukou system, though much criticized for depriving many city-dwelling Chinese of full rights to low-cost healthcare and schooling, acts as an almost-universal national insurance plan. Those now long-removed from farming life still have the comfort of knowing, if things ever got really tough, if they lost their jobs or the small business they started goes bust, they could go back to where they or their parents came from. They always have a place to live and enough land to feed themselves and scratch out a bare living.

China is the most entrepreneurial place in the world, which creates huge benefits for everyone living here, including better products, services and fast-growing incomes. Small farm plots widely held is one reason for this. They act as the safety net.

So, creating a more efficient farming system by giving peasants the right to sell or mortgage the land they farm or hold title to might ultimately do more economic harm than good. Chinese government has so far stalled on major reforms of peasant land ownership. Instead, city-dwellers are renting the rights to farm their rural plots to local peasants who have the energy and ability to manage larger holdings. The incremental effect is that average farm size will grow gradually. But, of course, renting land isn’t the same as owning it.

No one will invest in improving the quality of the land if they are renting it year-by-year It’s not only efficiency that suffers. The levels of heavy metal soil contamination is reaching alarming levels in many areas, especially Hunan Province, source of 13% of the rice grown in China. Who will pay to clean up the soil and so improve food safety in China is a national problem without an obvious answer.

The price of fruits, vegetables and grains are all rising in China, lifting peasant incomes. But, so are cash salaries for low-skilled jobs in cities. Run the numbers and it still looks to be wiser in many cases to leave the land. The standard land measurement in China is the “mu”, equal to one-sixth of an acre or about one-twentieth of a hectare. The income from farming one mu in China is about equal now to one week of low-pay wages, for example, the salary for sweeping up factory floors. Not many peasants own and farm 50 mu.

As I write this, I’m intermittently staring out the window of a high-speed train traveling 300kph through rural parts of Shandong Province. It takes less than a second for the train to pass a typical small plot of farmed land. The spring wheat is already about 18 inches high. There is no one out in the fields. Thanks to pesticides and chemical fertilizers, far fewer people are needed to grow food than when I first came here in 1981. Every day people leave the land and will continue to for decades to come. But, who should own China’s land and who should farm it remain the central questions of China’s five-thousand year-old civilization.

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Good News About China’s Food Price Inflation: Chinese Peasants’ Time of Unprecedented Plenty

Leave a Comment / December 14, 2010

Bamboo painting from China First Capital blog post

Food prices in China, as everyone inside and outside the country now knows, are rising fast, in some cases by over 30% during 2010. The Chinese government puts some of the blame on speculators who are said to be buying large quantities of fresh food, holding it off the market and then profiting from price increases. There seems to be some evidence of this.

There’s no short-term fix for these price increases. The Chinese government has released for sale some of its food stocks. It is also urging peasants, and local cadres who govern rural China, to make sure more food is grown next year to increase supplies. The peasants probably won’t need any such encouragement.

The increases this year in food prices have done more, in a shorter time, to lift income levels for many of China’s 600 million peasants than any other single measure taken over the last 30 years.

There has never been a  better time, in China’s long agrarian history, to be a peasant. Fundamentally, food price inflation in China represents a colossal transfer of wealth from China’s more affluent urban areas to the rural hinterland where half of China’s population still lives.

If this lasts, it will narrow the gap in living standards and income levels between China’s cities and countryside. This is one of the overarching goals of the Chinese government. And yet, no one is applauding.

Instead, the Chinese central government has reacted with some alarm to the recent price increases. It knows that higher food prices are putting the squeeze on city-dwellers, including, of course, those in the capital Beijing and other major cities. In China, communist power originally took hold in the countryside, and a lot of party doctrine still speaks about its roots among the peasantry. But, political power today is firmly rooted in urban areas.  China’s political, economic and cultural elite all live in major cities, as do most of their friends and family. So, price rises effect this group directly.

When apples, the staple autumn fruit in most of China,  almost double in price, as they have this year, political leaders will soon hear about it. The fact that China’s apple farmers now have a lot more money in their pockets is not necessarily part of the political calculus.

Yet, it is undeniable that the fastest and most effective way to raise peasant living standards and real incomes is higher farm prices that don’t fuel overall inflation. There are signs that’s now the case, that the only area of significant double-digit inflation is in food prices. If so, this is unquestionably the best time in Chinese history to be tilling the land.

How long will this last? Of course, commonly, a spike in food prices leads to overall price levels rising as well. This can erode, or even wipe out,  the rise in income for farmers from higher food prices. Also, today’s high prices will certainly lead to more land being cultivated next year, as farmers chase the fat profits from today’s prices.

I was just in Jiangsu Province, in central China, and it seemed like most of the farmland is under plastic cover this winter, allowing peasants to keep growing and selling vegetables. Supply goes up, price comes down. Eventually.

How high are food prices at present? Looking around my local covered market, prices in the stalls for many fruits and vegetables are now as higher or higher than prices commonly seen in the US. Looking just at autumn fruit, apples are about $1 a pound; navel oranges around 60 cents; clementines about $1 a pound; bananas are 50 cents a pound. Meat prices have risen sharply.

Pork remains comparatively cheap at about $2 a pound, but chicken is quite a bit higher here. Garlic and ginger, the two fundamental staples of all Chinese cooking, are both at all-time highs of around $1 a pound.

So far, in my experience, higher food prices haven’t yet fed through to higher prices at restaurants, noodle shops or even the outdoor steamer wagon where I buy corn-on-the-cob and potatoes as snacks. This means restaurant margins must be hurting. One notable exception, McDonalds in China. They recently announced price increases to counter effect of rising raw material costs.  With about 900 restaurants in China, all in larger cities, McDonalds feeds a lot of people.

Wages are also rising very steeply in urban China, as is household wealth for anyone who owns property. This seems to be allowing most urban Chinese to absorb higher food costs without much of a fuss.

In other words, just about everyone across this country of 1.4 billion is doing much better, year by year. For now, the 600 million peasants are doing best of all. Viewed across the breadth of China’s long history, no less than across the last 30 years of unparalleled economic progress, this is a singularly welcome development.

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