China's 'New Deal' Faces Big Challenges

Published: 3/10/06, 1:04 PM EDT
BEIJING (AP) - Communist leaders have launched China's most ambitious initiative in decades, promising billions of dollars in social spending and farm aid to help the 800 million people in its neglected countryside catch up with its booming cities.

The blueprint unveiled at this week's parliament meeting echoes President Franklin D. Roosevelt's New Deal of the 1930s, and is aimed at easing tensions over the growing gap between China's rich and poor.

But Beijing faces daunting challenges making it work in the countryside, where their control over local leaders is limited, abuses are common and anger at corruption and land seizures is rising.

"The countryside is very much like a lawless place," said Ding Xueliang, a former Communist Party official who teaches at the Hong Kong University of Science and Technology.

The plan for a "new socialist countryside" promises new schools, hospitals, roads and other aid to the countryside, where many people are as poor as ever while a small elite have prospered from two decades of economic reform.

The programs are the starting point of what the ruling party has said will be an effort lasting at least a decade to shift development resources to the countryside.

"China is now standing at a new historical starting point," Premier Wen Jiabao said Sunday in a speech to parliament delegates, who routinely approve policies decided in advance by communist leaders.

Ding said current leaders are better aware of what is going on than previous generations.

President Hu Jintao and Wen, the party's No. 3 leader, spent many years in Tibet and other impoverished regions, and they have extensive contacts outside Beijing.

"They know much more about the realities in the terribly poor regions," Ding said.

Thanks to annual economic growth above 9 percent and surging tax revenues, the government can afford to invest in the countryside, where incomes average only $400 a year.

China's consumer spending boom is largely limited to the cities. Rural families save whatever little they have for education and doctor bills.

The government is raising spending on subsidies and other support for farmers by 11 percent to $42 billion this year.

It is eliminating farm taxes and waiving school fees for rural families, with $27 billion in increased support for compulsory education, through grade nine, over the next five years.

Some $2.5 billion in new spending is earmarked for upgrading and building hospitals by 2010. An additional $500 million will be spent on increasing government support for rural health insurance programs.

Trial versions of those initiatives have been put in place in some areas, such as the remote western region of Ningxia.

Rural incomes there are only a third of the levels earned by farmers in more affluent eastern provinces.

But annual economic growth in Ningxia jumped to nearly 20 percent in 2004 after the government boosted spending on roads, social programs, subsidies for raising grain and livestock and other programs, says Stephen Green, senior economist for Standard Chartered Bank in Shanghai.

A report by Green dubbed the region's transformation "Ningxia-nomics."

However, such costly programs don't address other basic problems, such as policies that bar rural workers from moving to cities to find higher-paying jobs.

A key source of rural unrest is the seizure of farmland by local officials who sell it at a profit to developers for shopping malls, factories and other projects. Thousands of protests have erupted over complaints that farmers are paid too little.

Officials promised this week to rein in land seizures.

"We will adopt a very strict approval system for land use to eliminate the unauthorized expropriation of land," Yin Chengjie, a deputy agriculture minister, said at a news conference.

But the government made no mention of a step that Chinese academics say could go a long way toward improving rural life - letting farmers own land for the first time since the 1950s.

And there was no mention of easing the ruling party's monopoly on power and giving the public the right to pick their own leaders.

"These populist authoritarian policies are good for rhetoric, but they have to broaden the system of government to make them work," said Bob Broadfoot, whose Hong Kong-based Political and Economic Risk Consultancy conducts annual surveys on corruption.

"I think they know full well what they have to do," he said. "But I don't know if they know how to do it."
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