Letter from rural and lower tier city in China
Here’s a summary of my trip notes in rural China during CNY holiday visiting a new family member who is originally from rural China.
Right before Chinese New Year holiday, Chinese official number showed that China now has over half (51.4%) of population living in the cities, for the first time in China urban population takes over rural one. If you are wondering about what that means for china, its economy, consumers and property market, I hope you can find some useful facts from below:
The city is called Yugan in a rural part of the relatively poor Jiangxi Province(GDP per capita ranked among bottom 20% of all provinces). It is a county-level town (there are over 2800 of them in China) with 1million people, 8 hours drive from Shanghai, one of the so-called 4th tier cities.
The scenery is pretty bleak. The farmland itself might be considered pretty (mixed plots of various vegetables - rice, Chinese cabbage, turnips, sugarcane, and more, dotted throughout with small creeks and ponds), except that there is garbage everywhere (a sad reality of rural China), and the architecture is entirely without character and generally quite ugly, and there isn’t many incentives to make them prettier, as at least some of the houses were built for the purpose of being torn down and get compensated soon.
-Rural land compensation policy, and rural land ownership ambiguity as a major reason for rural conflicts/protests:
Many of the families in the area have saved enough money to upgrade their traditional, single-story farmhouses to multiple-story brick and concrete structures. Even if they don’t have enough money, they would just build the frames and one floor with walls and windows first and leave the rest as bare-bone structure.
The striking fact: almost all of these relatively new brick/concrete structures in Jiangxi are not completed, after some investigation I found out that it has to do with current land transfer and compensation policies in this locality, which creates incentives for farmers to claim as many floor space as possible for their houses even if they don’t have the money to finish them for actual living.
When the local government plans to build a road or take certain plot of farmland for development (either industrial park or real estate development projects), it compensates farmers, thru local village officials who set much more detailed standardsand execute, based on the Ground Floor Area of houses. In rural Yugan, it is 480 yuan/sqm (or about USD80/sqm) for the floor space of a bare-bone structure; the price goes up the better the quality of interiors go. Farmers do not own the land under their houses, although they can buy a plot in local market and build houses for their own use ( it’s about 1,200/sqm for the land). (. In rural China, farmers have the right to use land but all lands are collectively owned by the villages) Whatever they are paying for that plot of land, there is a great gap between that and the market price, set when the rural land changes hand from collectively owned by the village to developers who acquire the land for development. The extreme non-transparent and unfair distribution of that difference is the source of growing farmers protests these days. For city folks, if they go to villagers and buy a plot of land to build their own houses, the property rights are not protected and legally acknowledged.
Rural land ownership reform has been talked a lot by some policy makers and researchers these days, in the beginning of the year Premier Wen mentioned specifically that farmers should get a bigger share of the rural land transfer proceeds.
The ambiguity of “collective ownership” of the rural land has increasingly become a main source of social conflicts and instability in China. In a recent much-discussed case of peasant protest in Wukan in southern Guangdong, what happened was local villagers got compensated a fraction of what the developers paid the local governments and officials. Similar things happened in past two decades of rural development and numerous rural protests and conflicts.
The ambiguity of such ownership structure also prevents the large-scale agricultural production from happening in a bigger way.
It also means corruption at local village/county level can be horrendous, as these officials are given outsized power to allocate wealth. Last but not least, it could mean land cost has much more upside momentum going forward, given higher compensation standards.
200yuan/day is the price for hiring someone to work on your farm in this part of rural China, as many young labors went to the city to work, labor increasingly becomes a scare resource.
The family we are visiting has four kids ranged btw 35 to 22 (the parents got fined for the last two kids as each rural family can have up to 2 kids by rule). It is a microcosm of China’s development and urbanization, and it takes one family in China to experience what could have happened in several generations elsewhere: oldest works on the farm, second oldest is a migrant worker, third oldest got vocational training, youngest went to college. The second oldest left her children in her home village for her parents to take care of, the kids go to schools in the county that teaches English classes. The youngest two children now have decent jobs in the 2nd tier cities and are putting their roots there.
The lower tier city: real estate and consumption
The town of Yugan is truly ugly. The entire town is a hodgepodge of small buildings and supply shops. It seems that the principle purpose of a county-level town like this is to supply all the workers and farmers in the area. Most shops sell equipment, home appliances, and there are very few restaurants. I was told that the rural farmers got cash subsidies when they buy home electronics equal to 10% of the retail prices.
There are a few new property developments in the city, with ASP 4,000-5,000 yuan/sqm. Prices have not gone down in the past year as housing market in most big cities took hit. According to a young local school teacher whose family lives in nearby village, many villagers who got extra money bought houses in the county, for better public facility, hospitals, and schools for their kids. The farmers also believe in storing value in houses in the city, so as long as they can afford they’d buy apartments even if the 4tier city doesn’t provide many job opportunities for them to justify moving to the city yet.
There is one big super market and one brand new shopping mall. The super market was quite packed, most brands are not recognizable from 1st,2nd tier perspectives, with many being “creative version” of big consumer brands in the larger cities. For example, "CFC" with Berger picture directly taken from Berger king catalogue and a logo of piglet wearing red and white stripe apron that passes for KFC in distance. The three high-end wedding photo studios all have similar names: “New York, New York”, “Paris, Paris”, and “Milan, Milan”.
There were only two semi-decent hotels in the town of 1 million people. We stayed at the nicer one. The restaurants in the hotel were packed the whole time by locals and “returnees”. There were BMWs and even Porches in the parking lot- probably belonging to business people who had left to the larger urban center, made fortunes, and were returning home for Chinese New Year’s.
(From Eva's Blog: http://i.caixin.com/home.php?mod=space&uid=23&do=blog&id=73562)