By Richard Baum, Ph.D., University of California, Los Angeles
Official statistics confirm that the plight of China’s farmers was generally worsening in the 1990s. Since the late 1980s, farm incomes had been stagnating or even declining. Consequently, the rural-urban income gap had grown even wider. In 1993, farmers in half a dozen provinces angrily protested, and in some instances rioted, the unauthorized diversion of procurement funds by rural officials.
A Jump in New Investments
After China’s national economy changed to a ‘socialist market economy’, it was noticed that the wheels of the economy were beginning to smoke, and then to burn. The first sign of malaise was a dramatic spike in retail prices. Under strict control since the inflationary scare of 1988, consumer prices in 35 major Chinese cities jumped more than 15 percent in the last six months of 1992. In 1993, the urban inflation rate unofficially exceeded 25 percent.
Reflecting the dramatic easing of credit and loan restrictions in China’s provinces, the first half of 1993 witnessed a 50 percent increase in the nation’s money supply and an even greater jump in new investment and construction.
Among other things, this investment binge was fueled by a practice, widespread in rural areas, of local officials taking government revenues earmarked for payment to farmers for state-procured grain and diverting these funds into speculative local construction projects, stock market transactions, and real estate investments.
This is a transcript from the video series The Fall and Rise of China. Watch it now, on Wondrium.
Farmers’ Worthless IOUs
According to a report in the official Farmers’ Daily News, less than one-third of the $13 billion allocated by the central government for state agricultural purchases in 1992 actually wound up in the hands of farmers. The remainder—a whopping 10 billion dollars—was reportedly diverted by local officials seeking to parley short-term real estate and stock market investments into quick, hefty financial gains.
In lieu of the diverted cash, farmers in many provinces were being paid for their crops in ‘white slips’, or IOUs, issued by local governments. In theory, these were redeemable for cash at a specific future time. But in many cases, redemption never came, as many of the investment schemes collapsed, leaving peasants holding worthless IOUs.
Learn more about the agricultural crisis in China.
The Sichuan Eruption
The farmers protested against a wide variety of ad hoc local taxes, fees, and levies imposed upon them by predatory rural officials. One of the worst outbreaks of violence took place in Sichuan province, where 15,000 farmers in one county rioted in the spring of 1993, assaulting cadres and burning police vehicles in protest over a series of exorbitant local taxes.
The Sichuan eruption was just the tip of a larger iceberg. According to government statistics, in the 16 months from January of 1993 to April of 1994, there were a total of 1,200 ‘large’ rural disturbances, each involving at least 500 people and encompassing more than one village, in addition to 100 ‘very large’ disturbances involving at least 1,000 people, and 30 ‘especially large’ ones involving 5,000 people or more. Total casualties in these incidents were said to surpass 13,200, with property damage exceeding about $3 billion.
Controlling the Rural Unrest
Describing mounting rural unrest as a threat to China’s political stability, the central government in 1993 issued a stern warning to village and township officials, prohibiting them from imposing local taxes in excess of 5 percent of farmers’ total incomes, and forbidding them from siphoning off state funds earmarked to pay farmers.
Finally, local officials were ordered to redeem all outstanding IOUs. “If there are problems in the villages,” warned Politburo member Tian Jiyun, “the present regime will be unable to stay in power.”
In an effort to stem the rising tide of rural discontent, the ministry of agriculture, in May of 1993, announced the cancellation of 43 different kinds of ad hoc taxes, fees, and levies imposed on farmers. To halt the diversion of funds intended to pay farmers, the party’s top disciplinary commission formally banned party officials at all levels from investing in stocks.
Learn more about the decollectivization of farming in China.
Regional Economic Differences
In the face of declining farm incomes, large numbers of farmers were opting to leave the land. With coastal investment surging, new jobs in construction and manufacturing were springing up in the open cities and special zones along the eastern seaboard. By 1993, the number of migrant workers had swelled to over 100 million.
Under the impact of Deng Xiaoping’s fiscal decentralization initiatives, regional economic differences grew significantly wider. The seaboard on the eastern coast prospered, while the interior provinces stagnated.
Writing in 1993, two Chinese social scientists noted that disparities in wealth between coastal and interior provinces had reached levels equal to or greater than those existing in socialist Yugoslavia on the eve of its disintegration in 1991 and ’92. They warned that unless steps were taken quickly to remedy this situation, China could also move from economic collapse to political disintegration.
Common Questions about the Rural Unrest in China
The investment binge in 1993 was fueled by the practice, widespread in rural areas, of local officials taking government revenues earmarked for payment to farmers for state-procured grain and diverting these funds into speculative local construction projects, stock market transactions, and real estate investments.
In Sichuan province, 15,000 farmers in one county rioted in the spring of 1993, assaulting cadres and burning police vehicles in protest over a series of exorbitant local taxes.
In an effort to stem the rising tide of rural discontent, the Chinese ministry of agriculture, in May of 1993, announced the cancellation of 43 different kinds of ad hoc taxes, fees, and levies imposed on farmers.
