A Tale of Two Chinese Villages

As China rushes to gain wealth and international clout, the gap between rich and poor widens. Local corruption and ineptitude block farmers' road to prosperity.

BEIJING'S clarion for farmers to get rich has a hollow ring in Xindian.

Earning only $300 a year for his family of four and deeply in debt, Xue Zhang desperately wants to start raising chickens in the village, located in poverty-stricken northwest Shandong Province, but has no money.

"They tell us to go into business, but where is this business?" he asks, sipping tea in his one-room mud-brick house. "We simply do not have any ways to get rich."

But in Xinmoli, along Shandong's booming northeast coast, China's market reforms resonate deeply.

After the government quickened capitalist-style changes last year, Sun Shugang and other former farmers here took the cue to expand their global network, which includes businesses in the United States, Hong Kong, Germany, and Russia.

"It is important for China to develop her economy," says Mr. Sun sitting in the village company's lounge beneath a scroll that reads, "Judge the situation and grasp opportunities to get rich. If China remains poor, how will she establish herself in the international community?"

As senior leaders rally Chinese to rapid economic growth, villages resound with growing dissonance amid uneven economic and social change. Home to more than 800 million people, the Chinese countryside, once an impoverished fabric of collective agriculture, is becoming a patchwork of contradictions that is worrying China's Communist regime.

Ever since communes gave way to land leases in the government's first reform initiative in the late 1970s, farmers say incomes and opportunities to earn money on the side have increased. But so have the gaps between the country and the city and among rural dwellers themselves.

"There are vast differences and discrepancies within each province, each county, each township, and even within the villages," says a Western agriculture expert in Beijing. Rural incomes cut off

In recent months, rural tensions in China have bubbled to the surface as modest farmers are squeezed by falling rice, wheat, and corn prices and rising costs for fertilizers, pesticides, and electricity.

Cash-strapped local governments created a rural crisis earlier this year when they issued IOUs instead of paying farmers for their grain. The farmers staged demonstrations and sit-ins in a number of counties in the eastern agricultural belt.

In the rush to lure foreign investment, many local governments spent heavily in developing industrial development zones without sanction from Beijing. That left few funds to buy the grain that farmers must sell at state-fixed prices, prompting the widespread issuance of IOUs.

Anxious to nip budding discontent among their crucial rural supporters, Beijing Communist leaders have stepped in to make sure local governments pay farmers in cash and not IOUs and sent investigative teams to all provinces to probe rural complaints.

Beijing also frets that local officials are losing touch with the Communist Party's agricultural roots, muscling out small farmers as did the officials' predecessors, the hated landlords of old.

According to a central edict, farmers should not have to pay more than 5 percent of per capita, after-tax income to villages and townships for fees and taxes ranging from infrastructure improvements to family planning fees.

In effect, though, farmers can pay up to 15 percent of their income to party officials, a burden that Beijing recognizes is prompting a backlash against the party. Increasingly, Chinese newspapers carry reports of suicides by rural residents who cannot shoulder the financial burden imposed by the locality.

"A considerable number of regional and departmental leading cadres do not put agriculture on their agenda," the party newspaper, People's Daily, said in an editorial this month. "What they care for are development zones, industrial projects, or real estate. They have ignored the interest of the farmers."

"At the grass roots, the Communist Party is dying," says a Chinese analyst.

Faced with spiraling population growth but stagnant productivity in the countryside, Beijing's answer is to rally workers not needed on the farm to rural business.

But that alternative seems nearly exhausted as rural industries employ only about half of the 200-million-strong surplus labor force that grows by about 5 million new unemployed rural workers yearly and output of rural enterprises falls, according to government figures. Development vs. stagnation

A look at coastal Xinmoli and rural Xindian highlight both the potential and obstacles for villages scrambling to pull out of the poverty rut.

Widely cited as a model village with 63 enterprises, including four overseas operations, and a brisk world trade, Xinmoli built its business through the shrewd leadership of some village elders and some unique international connections.

When Nationalist autocrat Chiang Kai-shek withdrew to Taiwan in 1949, a contingent of soldiers from Xinmoli went with his retreating army. That has given the village of 1,900 people an international base and financial support upon which to build what local people now call a conglomerate.

To expand, Xinmoli regularly sponsors young people as students in foreign countries, requiring them to establish operations there and work for the village after graduation. This has led to the establishment of an ocean shipping company in Hong Kong and a $5 million exhibition center in San Francisco.

But Xinmoli and other well-off oases in the Chinese countryside face a growing new threat: crime.

At the meeting of the rubber-stamp Chinese legislature in March, several rural leaders spoke out against rising rural lawlessness. Corruption common

Indeed, village heads are known to have crime connections in the pursuit of a fast buck, Chinese analysts say.

Recently, the leader of Daqiuzhuang, a hamlet near Tianjin known as China's richest village, was arrested for sheltering criminals.

"There is a lot of theft. Young men have a saying: `Eat the fat households,' " says a businessman in Yantai, which is near Xinmoli. "They have just learned the materialistic ways of the West and how to get rich and enjoy themselves. They don't want to learn business management."

But the success formula that has brought wealth and power to Xinmoli eludes disadvantaged hamlets like Xindian. Mirroring the plight of many struggling Chinese farmers, Mr. Xue, the local farmer, faces constant hardship: low state prices for grain, pest destruction of last year's cotton crop, skyrocketing costs, the rising burden of local fees and taxes, water shortages, and a corrupt party chieftain whom villagers charge raped a local girl two years ago.

The farmer says his only hope is to give his youngest son an expensive college education and a chance for a good job. "If the village cadres would think about the farmers and lead us to get rich together, we wouldn't have any grievances," he says.

"But compared to areas near Yantai," he says, "we are backward. The main problem is we don't have any rural enterprise."