A Boom Financed by Taxes on the Poor: Inequalities Are Not Based Only on Wages. Peasants Have to Pay More Than 100 Levies to the Government, While in the Cities, Migrant Workers Face High Charges for Public Services

By Gao, Mobo | New Statesman (1996), January 1, 2005 | Go to article overview

A Boom Financed by Taxes on the Poor: Inequalities Are Not Based Only on Wages. Peasants Have to Pay More Than 100 Levies to the Government, While in the Cities, Migrant Workers Face High Charges for Public Services


Gao, Mobo, New Statesman (1996)


China's economic miracle has become a cliche. The figures bear out the country's amazing economic development. China has maintained 9 per cent annual growth for almost three decades. It has overtaken the United States as the world's largest recipient of foreign direct investment, with an inflow of $54bn in the first ten months of 2004. It has pulled more than 300 million people out of absolute poverty in a period of less than two decades, an achievement unprecedented in human history.

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There are now more than 100 million middle-class Chinese and that number is growing, says the Los Angeles Times. The total number of internet users is already the second-highest in the world, nearing 100 million. According to one estimate, during the early 1990s, three-quarters of the world's construction cranes were in China, a quarter of them in Shanghai alone. China produces 50 per cent of the world's cameras, 30 per cent of its air conditioners, and 25 per cent of its washing machines.

Or if you want yet more figures: in 2002, 15 per cent of the world's economic growth and nearly 60 per cent of its export growth came from China. Measured in purchasing-power parity, the country's gross domestic product already ranks second in the world. Within the next four to five years, China will become as big a force as the 25 economies of the European Union put together. And so on.

Beneath these hyperboles lies a grimy reality that often escapes media attention. China is a country in which 70 per cent of the population are still rural and, by western standards, live in poverty. Over the past two decades, between 100 million and 150 million migrants have moved from the rural to the urban areas either to look for work or to work in sweatshops. The average wages of these migrant workers have remained the same since the 1990s: between $50 and $70 a month. That is China at its worst.

Healthcare has fallen shockingly behind what it was in predevelopment years. Even official spokesmen now admit that more than 50 per cent of the rural population have not got the money to see a doctor, even where there happens to be a doctor around. Increasingly, urban residents have begun to fall into this category, too, as more workers lose their jobs: there may be as many as 15 million unemployed people in the towns, and at least ten times that number in the countryside.

The polarisation of China is so sharp that Chinese leaders themselves repeatedly give warning of the kind of social unrest that could put the regime in danger. This danger can be measured by the Gini coefficient, which is used widely by economists to gauge whether wealth is distributed fairly within a country. According to official Gini figures, the disparity in wealth is growing steadily, and has been greatly underestimated.

In the post-Mao era, and since Deng Xiaoping took over in the late 1970s, the central government has invested enormous amounts in such coastal cities as Shanghai and Shenzhen, and has created favourable conditions for foreign companies to operate, building new infrastructure and introducing tax concessions. As part of creating this investment, rural China has been taxed. In return, the central government has spent little on rural education or healthcare. Local governments at county, township and village levels owe huge debts. The whole rural bureaucracy is bankrupt.

According to Li Changping--a former Communist Party cadre in Hubei who in 2000 wrote a celebrated open letter to the then premier, Zhu Rongji, and subsequently published a book on the plight of people in the countryside--the debt in the township where he worked amounted to 1,000 Chinese yuan ($85) per head in 1999. A recent official estimate is that the total rural debt amounts to about 800 yuan for every rural resident.

How do local governments find the money to pay their teachers as well as paying the interest on these debts (interest that is sometimes as high as 30 per cent, and is very often gathered by debt collectors who are the party and government officials themselves)? …

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