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Beijing‘s New Deal
Alarmed by China‘s growing income gap, Hu Jintao has introduced massive new programs to aid the rural poor.

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By Melinda Liu
Newsweek International
March 26, 2007 issue - What a difference a mere $1.41 can make. To most residents of affluent countries, the figure is minuscule, small change. The same goes for most middle-class residents of China‘s booming cities. But for rural Chinese farmers, whose $460 average income is less than a third what China‘s city dwellers earn, it‘s a very different story. One dollar and forty-one cents drove 20,000 residents of Zhushan Village in Hunan province into the streets last Monday, to violently protest a rise of that amount in bus fares; $1.41 meant life or death to one student, who was reportedly killed in the clash with 1,500 baton-wielding police. Several dozen more protesters were injured. As600 cops continued to patrol Zhushan last Wednesday, a farmer named Sun, who requested anonymity to avoid trouble with authorities, explained why she and others had risked their lives over so small a sum. Their village is remote and desperately poor, she said. "Some men go and work in construction in town, earning just $64 a month for a few months a year," she said. "But my family has no income to speak of. We raise just enough crops to feed ourselves, that‘s all."
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Multiply that predicament by 800 million-plus—the number of rural Chinese—and you can begin to appreciate the problem facing Beijing. Even as the country charts spectacular growth—GDP spiked 10.7 percent last year—China‘s country dwellers are falling further behind. The rich-poor gap is largely an urban-rural one, and the divide is widening. China‘s Gini coefficient—a statistic economists use to gauge income inequality—has already reached 0.496, which is worse than in the United States. Anything above 0.40 is considered alarming.
Now President Hu Jintao and Prime Minister Wen Jiabao are accelerating efforts to address imbalances that they inherited in 2003—and which could threaten the regime‘s stability if unchecked. During the recent 12-day session of the National People‘s Congress, which concluded last week, the country‘s leaders made headlines by announcing new measures to protect private property. But equally important were a raft of programs aimed at helping the poor: a 15 percent boost in rural expenditures (to $50 billion) to bankroll guaranteed minimum living allowances for farmers; a waiver of tuition and school fees for all rural students up to ninth grade, and an 87 percent hike (to $4 billion) for the health-care budget. These measures, says Wen Tiejun, an economist at Renmin University, amount to a "total change in strategy [by China‘s leaders], to focus on the people and the environment" instead of no-holds-barred economic growth.
For several years Hu and Wen Jiabao have extolled "a harmonious society"—namely, one not roiled by conflicts between haves and have-nots. Now they want to put their own stamp on economic policy before a crucial party congress this autumn. Without exaggerating, one could call the campaign China‘s New Deal; after all, Communist Party strategists have started explicitly evoking President Franklin Roosevelt‘s Depression-busting agenda, which created big federal programs to cushion the blows of the free market. "They‘ve studied the New Deal and Lyndon Johnson‘s Great Society enough to see parallels with their own ‘harmonious society‘," observes one foreign diplomat in Beijing. More to the point, party strategists "have studied even more carefully the collapse of the Soviet Union" and how to avoid it, says a scholar with the Chinese Academy of Social Sciences.
All this represents a big change for China‘s communist leadership, which for years has seemed to focus on one economic goal—rapid GDP growth—while ignoring the mounting social and environmental costs. Deng Xiaoping, the late architect of China‘s market reforms, declared, "Let some get rich first," so that others can follow. The rest haven‘t followed quickly enough, however, and explosive growth left an underclass of hundreds of millions of people earning less than $1 a day. Almost as soon as he became head of the Chinese Communist Party in 2002, Hu began laying the groundwork for a shift away from the get-rich-quick mind-set.
One of Hu‘s early priorities was abolishing the 2,600-year-old tradition of agricultural taxes; the cut was implemented nationwide by late 2005 and is beginning to pay off. The official number of grass-roots protests in China, euphemistically called "mass incidents," fell from 26,000 in 2005 to 23,000 last year. More important, rural conflicts made up only 21 percent of the total "compared to 60 percent before 2005," says Wen Tiejun, who credits the removal of farmers‘ heavy tax burden as a big factor in reducing rural unrest.
Still, Hu and Wen Jiabao are racing against time. The longer China‘s rural poor feel left behind by its economic miracle, the angrier they‘ll become, as demonstrated by last week‘s Hunan protesters, who shouted "Beat the government dogs to death!" as they set fire to five police cars. Beijing needs to find a way to create more employment in the countryside as well as in the cities; China will have 24 million job seekers this year—roughly equivalent to the entire population of Malaysia—and will be hard pressed to meet its target of generating 9 million new jobs, predicts Tian Chengping, minister of Labor and Security. "The country faces huge job pressure and a grim market in coming years."
Some of the biggest budget hikes will help fix China‘s tattered medical care and pension schemes. Prime Minister Wen promised that rural health cooperatives will expand this year to cover four fifths of the Chinese farmers; most still have no medical insurance and spend more than 80 percent of their cash on health care. Many farmers even prefer to die quietly at home rather than bankrupt their families by paying for expensive drugs and hospital stays.
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