18-11-2013, 10:33 AM
Key messages from President Xi...
Success of Xi’s ambitious economic plan may rest in rural regions
HONG KONG — China’s Communist Party has burnished President Xi Jinping’s plans for an economic overhaul with exultant propaganda about a historic turning point. But the success of his proposals, and the long-term health of the Chinese economy, could rest on policy battles reaching down into thousands of towns and villages over land, money and a misshapen fiscal system that has bred public discontent and financial hazards.
The party’s Central Committee under Mr Xi endorsed a package of 60 overhaul goals, released to the public on Friday, that the government said would propel China closer to becoming a secure, powerful and well-off country by the end of this decade.
The economic goals include expanding the role of markets in energy and natural resources, encouraging private investment in finance and easing state controls on interest rates.
But the committee’s decision and Mr Xi’s accompanying statement also dwelled on another set of problems that could matter just as much for China’s economic health: Farmland rights and revenue, local government taxes and finances, plus chronic shortfalls between many local governments’ outlays and the money they receive from the central government.
Mr Xi said in a statement accompanying the overhaul goals that the barriers to rural development were among China’s biggest worries.
“There has been not-fundamental reversal of the constantly growing disparity between urban and rural development,” he said in the statement, which was issued through the official news agency, Xinhua.
In many ways, China’s rural problems are a knot of issues about land and revenue. Local governments have grown dependent on taking farmers’ land for relatively little compensation and selling it to developers for a profit. They have been encouraged to do so because the central government takes the bulk of revenue, while assigning many tasks to local governments that require expenditure.
In China, farmland is, by law, owned by the village collectively, but in practice, the land is controlled by the state, giving officials a powerful voice over when to develop land and on what terms.
The central government transfers revenue to local governments, but many town and county officials say the amount is not enough to meet ambitions set by central leaders, economists who study China said. Officials in county and city governments, eager to secure jobs for their constituents and advance their careers, have also gone into dangerous debt to pay for building and business projects that often use that land as collateral for loans or to attract investors.
“Some acute problems in our country’s economic and social development are also related to the inadequacies of the fiscal and taxation system,” Mr Xi said.
Solving these problems is all the more pressing for him and Prime Minister Li Keqiang, because absorbing tens of millions of rural residents into cities is a crucial part of their policy.
Unless China’s leadership finds a way to unravel this knot of land and finance problems, many farmers will remain too poorly compensated to make a safe passage to life in cities, said Mr Hua Sheng, an economist at Southeast University in Nanjing, Jiangsu province.
Chinese cities also impose household registration restrictions that exclude rural newcomers from services, such as clinics and schools.
“Without making changes in land policy, the household registration system and government finances, it will be very difficult to advance urbanisation of the population,” he said. “China’s future growth also depends on solving these grassroots problems.”
The plan endorsed by the Central Committee last week showed that the government is exploring how to defuse problems by shoring up the finances of local governments, clearing up their dangerous debts and giving farmers more secure legal rights over their land, economists said. The government intends to build on policies that allow farmers to lease out land, encouraging the aggregation of fragmented plots into larger, modern family farms.
“The government is signalling a desire to blunt local government opposition to land reforms,” said Mr Eswar Prasad, a professor of economics at Cornell University who was previously in charge of the Chinese division of the International Monetary Fund. “Loss of revenue for local governments as a result of land reforms will presumably be partially compensated by changes to the tax and expenditure systems.”
But many local officials will still resist or try to evade policies that reduce land revenue, said Mr Tao Ran, Director of the China Centre for Public Economics and Governance at Renmin University in Beijing. The officials do not believe that the new transfers from the central government will be enough to compensate for their loss of the revenue, he said.
“There will be strong opposition in terms of implementation,” he said in a telephone interview. “The local governments often have such big debts that they don’t want to give up their monopoly control of farmland. A lot of their borrowing is mortgaged by land.”
The Chinese government could try to ease fiscal imbalances by giving more power to local governments to set their own spending and tax policies, partly reversing centralising changes made 20 years ago. But the central leadership is reluctant to give local officials a great deal of leeway, said Mr Arthur Kroeber, Managing Director at GaveKal Dragonomics, an economic research firm.
“If you give local governments more power, they’re less accountable, and the central government has less ability to control the behaviour of local governments,” he said. “But the problem with centralisation is that it’s a gigantic country.” THE NEW YORK TIMES
http://www.todayonline.com/chinaindia/ch...al-regions
Success of Xi’s ambitious economic plan may rest in rural regions
HONG KONG — China’s Communist Party has burnished President Xi Jinping’s plans for an economic overhaul with exultant propaganda about a historic turning point. But the success of his proposals, and the long-term health of the Chinese economy, could rest on policy battles reaching down into thousands of towns and villages over land, money and a misshapen fiscal system that has bred public discontent and financial hazards.
The party’s Central Committee under Mr Xi endorsed a package of 60 overhaul goals, released to the public on Friday, that the government said would propel China closer to becoming a secure, powerful and well-off country by the end of this decade.
The economic goals include expanding the role of markets in energy and natural resources, encouraging private investment in finance and easing state controls on interest rates.
But the committee’s decision and Mr Xi’s accompanying statement also dwelled on another set of problems that could matter just as much for China’s economic health: Farmland rights and revenue, local government taxes and finances, plus chronic shortfalls between many local governments’ outlays and the money they receive from the central government.
Mr Xi said in a statement accompanying the overhaul goals that the barriers to rural development were among China’s biggest worries.
“There has been not-fundamental reversal of the constantly growing disparity between urban and rural development,” he said in the statement, which was issued through the official news agency, Xinhua.
In many ways, China’s rural problems are a knot of issues about land and revenue. Local governments have grown dependent on taking farmers’ land for relatively little compensation and selling it to developers for a profit. They have been encouraged to do so because the central government takes the bulk of revenue, while assigning many tasks to local governments that require expenditure.
In China, farmland is, by law, owned by the village collectively, but in practice, the land is controlled by the state, giving officials a powerful voice over when to develop land and on what terms.
The central government transfers revenue to local governments, but many town and county officials say the amount is not enough to meet ambitions set by central leaders, economists who study China said. Officials in county and city governments, eager to secure jobs for their constituents and advance their careers, have also gone into dangerous debt to pay for building and business projects that often use that land as collateral for loans or to attract investors.
“Some acute problems in our country’s economic and social development are also related to the inadequacies of the fiscal and taxation system,” Mr Xi said.
Solving these problems is all the more pressing for him and Prime Minister Li Keqiang, because absorbing tens of millions of rural residents into cities is a crucial part of their policy.
Unless China’s leadership finds a way to unravel this knot of land and finance problems, many farmers will remain too poorly compensated to make a safe passage to life in cities, said Mr Hua Sheng, an economist at Southeast University in Nanjing, Jiangsu province.
Chinese cities also impose household registration restrictions that exclude rural newcomers from services, such as clinics and schools.
“Without making changes in land policy, the household registration system and government finances, it will be very difficult to advance urbanisation of the population,” he said. “China’s future growth also depends on solving these grassroots problems.”
The plan endorsed by the Central Committee last week showed that the government is exploring how to defuse problems by shoring up the finances of local governments, clearing up their dangerous debts and giving farmers more secure legal rights over their land, economists said. The government intends to build on policies that allow farmers to lease out land, encouraging the aggregation of fragmented plots into larger, modern family farms.
“The government is signalling a desire to blunt local government opposition to land reforms,” said Mr Eswar Prasad, a professor of economics at Cornell University who was previously in charge of the Chinese division of the International Monetary Fund. “Loss of revenue for local governments as a result of land reforms will presumably be partially compensated by changes to the tax and expenditure systems.”
But many local officials will still resist or try to evade policies that reduce land revenue, said Mr Tao Ran, Director of the China Centre for Public Economics and Governance at Renmin University in Beijing. The officials do not believe that the new transfers from the central government will be enough to compensate for their loss of the revenue, he said.
“There will be strong opposition in terms of implementation,” he said in a telephone interview. “The local governments often have such big debts that they don’t want to give up their monopoly control of farmland. A lot of their borrowing is mortgaged by land.”
The Chinese government could try to ease fiscal imbalances by giving more power to local governments to set their own spending and tax policies, partly reversing centralising changes made 20 years ago. But the central leadership is reluctant to give local officials a great deal of leeway, said Mr Arthur Kroeber, Managing Director at GaveKal Dragonomics, an economic research firm.
“If you give local governments more power, they’re less accountable, and the central government has less ability to control the behaviour of local governments,” he said. “But the problem with centralisation is that it’s a gigantic country.” THE NEW YORK TIMES
http://www.todayonline.com/chinaindia/ch...al-regions