China's Farmers Await Fresh Reforms

Government grain prices lag behind inflation, hindering rural investment

TALK to Ma Suo Qun and hear the jargon of two agricultural worlds.

Influenced by three decades of Chinese collectivism that ended in 1979, Mr. Ma still calls his township a commune, his village a production brigade, and a loose cooperative of 45 fellow farmers a production team.

Yet interspersed with the old lexicon is the new cant of capitalism: free market, "excessive" government, joint ventures, and even that bugbear of China's ruling communists, private property.

Here in the farming heartland of northern China, where rural folk laboriously till public lands near villages bustling with private commerce, Chinese agriculture is caught in an economic limbo.

"Ever since policies were relaxed, farmers no longer worry" about having enough food to eat, says Ma, who farms seven acres of land on a contract basis and runs a small but booming construction business on the side. "But I don't feel the land belongs to me. If it belonged to me, I would farm more intensively and have more enthusiasm."

Chinese agriculture is caught in a squeeze between new economic realities and outdated political constraints, observers say. With grain yields already high by international standards, further progress will be tough. Despite its focus on self-sufficiency, China faces long-term shortages, particularly in isolated interior provinces, the World Bank predicts.

The challenge comes against a backdrop of success.

This year's harvest will continue the slow, steady rise in output that has made China the largest grain producer, as well as the largest grain consumer, in the world. In September, Agriculture Minister Liu Zhongyi projected a grain crop of 440 million metric tons for 1992. The rest of China's grain needs are covered by imports, which have fallen with the bumper harvests of recent years. Newfound prosperity

Farmers say that since market-oriented reforms broke up communes and restored family farming their lives have never been better. Tractors and television sets proliferate. Houses pop up with the amenities and aura of new wealth.

Comforts have begun to blur memories of the terrible famines and starvation of 30 years ago. Farmers sit down to tables of plenty, shunning detested staples such as cornmeal buns that remind them of the meager rations of the past.

Yet among Chinese farmers seeds of bitterness grow.

Barred from booming cities and coastal economic zones that are at the cutting edge of reform, rural residents feel they are losing out. Farm incomes stagnate because government price controls on key commodities favor city consumers over rural producers. Although wheat and rice remain China's food mainstays, demand in the cities is shifting as better-off urbanites opt for meat, vegetables, and higher-quality grains.

For farmers, nonstaple crops are more lucrative because the prices are not set by the government. So-called early rice - considered of poor quality - went unharvested this summer in many provinces, according to Chinese newspaper reports. Low prices couldn't match the cost of gathering, and there were excess supplies in warehouses.

Meanwhile the cost of fertilizer and other farming necessities is rising, as is the burden of local government fees and taxes, farmers and analysts say. Investment in irrigation and other infrastructure is down. Land is under pressure from population and development, and tenure is unsure. Pests, floods, and other natural calamities remain a worry.

The government has yet to follow through on pledges to overhaul its grain-purchasing system and end the practice of requiring farmers to sell 40 percent of their grain at low, fixed prices. Although food subsidies are expensive and stymie rural reform, observers say the government is afraid that free-floating grain prices will add to an inflationary spiral.

"The big problem for farmers is inflation. Prices for production materials are going higher and higher while grain prices remain the same," says Zhang Guangyou, an economist and former editor of Farmer's Daily, an official publication. Grain should be decontrolled so the problem of low grain prices can be solved, he says.

"In China, the population is increasing, and the amount of land [farmed] is decreasing," Mr. Zhang says. "It is impossible for the farmers to get rich if they rely solely on agriculture. They will have to diversify and develop other rural enterprises."

Falling incomes are expected to drive millions of rural Chinese into nonfarm businesses. The countryside currently has a surplus labor force of 200 million people and Economic Daily projects that by the turn of the century 260 million rural laborers will have to find outside work.

Ma's construction business is one success story. He recently organized 40 workers from his village and took them off for eight months to construct a factory in a nearby county.

Yet farmers here in Hebei Province near Beijing express an uneasy sense that their newfound well-being may not last.

Since 1979, output per acre has jumped more than 40 percent, village officials say. But the area's population has jumped by the same amount, and many residents continue to live precariously.

This year, a destroyed cotton crop and a water shortage due to a failed well pump were grim reminders of their vulnerability to the vagaries of man and nature. Almost the entire harvest was lost when insects destroyed the cotton bolls. A faulty batch of pesticide was to blame.

"Farmers will continue to suffer because production materials are expensive, and some households can't pay," says Ma So Ching, a farmer who lost his entire cotton harvest. "Who's to say what will happen if there's a natural calamity?" Tax burden growing

Farmers also bristle under the growing burden of local fees and taxes, which can gobble up the profits from an entire seasonal crop.

Despite the need for new jobs and income, many rural residents are skeptical of the push to develop rural enterprise. Capitalized through local tax levies, new operations are often seen as personal domains of local communist cadres. "Whenever we call for a lowering of taxes, the local officials resist," says farmer Wang Shu Ying.

In the long term, China needs to go further on reforming land tenure to achieve higher yields and the efficiencies of mechanization, observers say. The next stage would likely give farmers more freedom in starting new businesses and allowing them to contract larger holdings and hire laborers, in effect reinstating a version of the hated landlord system. This will require painful political decisions.

"In the last few years, China's agriculture has taken a zigzag path," says one Chinese analyst. "Some think reform is complete in rural areas because of the family [farming] system. But if the leaders ... think rural reform is finished, things will turn for the worse."