FURTHER PROMOTE STABLE GROWTH OF THE RURAL ECONOMY1
FEBRUARY 18, 1989
Rural work in Shanghai had great results last year and the public was quite satisfied. The “vegetable basket” project, in particular, played a great role in boosting the morale of Shanghai’s people. A few days ago, Zhuang Xiaotian2 and I both attended the finale and awards ceremony of the “Prestige Cup” competition for vegetable farms. I said “Thank you!” three times to those from the vegetable farms and the city’s finance and trade departments, noting that we haven’t forgotten how hard our farmers from outlying districts battled against high temperatures last year and worked diligently to ensure a supply of non-staple foods for our residents. Nor have we forgotten the strenuous rural efforts of our county Party secretaries and county heads, and the contributions to the “vegetable basket” project of Vice Mayor Ni Hongfu as well as colleagues from the Municipal Agricultural Commission and other departments. Today, I again want to say to all of them, “Thank you! Thank you! Thank you!”
Last year’s good results were also due to the good policies of the Municipal Party Committee and the municipal government and their forceful implementation by rural cadres. What was so effective about these policies? The answer is, they devolved power to districts and counties, giving them greater autonomy, so that measures taken could be better suited to actual circumstances and cadres and ordinary people would be more strongly motivated. This policy of devolving power must not waver. Some other policies also played a very positive role, including those that had all sectors and industries support agriculture, especially preferential policies toward township and village enterprises (TVEs), and had industry compensate for agricultural shortfalls. This year, they must be further developed.
Before this meeting, I heard colleagues from rural areas say that the central government is going to collect more money from Shanghai again, so the city will be taking both money and power from the counties; they’re also worried that the policy of fiscal contracting will change. On this point, I am today reiterating that the rural policies adopted by the Municipal Party Committee and government will remain stable and will continue to be implemented. This is essential both for rural areas and for Shanghai. I’ve exchanged ideas with Jiang Zemin about this and he is strongly in favor of keeping our rural policies stable. Of course stability does not mean no changes whatsoever—it appears that there will be some very minor policy changes this year. This is mainly because the central government has recently decided on a series of policies aimed at fiscal tightening so as to regulate the economic environment and impose economic order.
Some of these policies will affect rural areas. For example, an extra 10% of the extrabudgetary funds of TVEs will be collected for an energy and transportation fund. In the past, 7% was collected for this; now an additional 10% will be collected, with half of this amount to be turned over to the central government and half to be retained locally. I’m afraid there’s no way to waive or reduce the more than RMB 20 million that has to be turned over to the central government, but the city government won’t take the locally retained portion—which is another RMB 20 million or more—this will all be retained by the counties. Otherwise there are no changes. We’ve said the fiscal contracting system won’t change for three years, but I think it won’t change for five years, and the amounts in excess of the baseline will still be kept by the counties. Exports will also be contracted for: let’s see who is most capable, who is best able to export more and earn more forex. The forex in excess of the baseline will be kept by the county and can be used to import animal feed.
Also, the State Council recently decided to tighten up somewhat on tax waivers and reductions. Last year, the city enacted a preferential tax policy that waived or reduced the income tax of new TVEs for one, two, or three years, depending on their locations; it also waived or reduced the income tax of new urban-rural joint enterprises for two, three, or four years, depending on their locations. Now, in accordance with the State Council’s spirit of cleaning up, rectifying, and strictly controlling tax waivers and reductions, the city’s Finance Office has issued a document to resume tax collections beginning this year. This document must be implemented as it enacts the spirit of the central government, but it must be integrated with local realities. Tax waivers or reductions of less than RMB 20,000 can be approved by individual counties; those in excess of RMB 20,000 must be submitted to the Municipal Finance Office for approval. In principle, we will be lenient this year. We will first remain stable for a year; once times improve next year and Shanghai is relatively stable, we will enforce it strictly. Therefore on the whole it seems that there won’t be many policy changes this year, so I hope that will put you at ease. However, we must also see that handling taxes strictly is a good thing. Our taxes should become standardized and institutionalized, and not be based on arbitrary decisions.
The purpose of keeping current policies stable is to keep rural areas stable and to develop agriculture. However, if rural counties are to be truly agriculture oriented, they must first determine how to further motivate farmers to plant grain, grow vegetables, and raise pigs. I have one suggestion that I hope you will discuss. At the moment, farmers are unwilling to plant grain, saying that grain prices are too low. Actually, before the Third Plenary Session of the 11th Party National Congress, grain purchase prices were much lower than they are now, yet farmers planted grain all the same. Why are they now unwilling to farm? It’s mainly because TVEs have developed and, relatively speaking, the returns from farming are too low. TVEs have become “money trees,” while agriculture has become a “big burden.” Therefore in order to motivate farmers to plant grain, grow vegetables, and raise pigs, you not only have to raise the purchase price for non-staple foods, but you also have to adjust the returns from TVEs.
Where will you get the money to raise purchase prices? The city’s finances are very tight and it can’t possibly increase subsidies, so we will still have to rely on everyone to use industry to subsidize agriculture and non-staples. Although this is already being done and farmers are getting some subsidies, this form of subsidizing doesn’t feel obvious to farmers, who still think it isn’t worthwhile to farm. Perhaps we should consider collecting the money from TVEs that is used to subsidize agriculture and non-staples as a tax and use it to establish a fund for pricing or for supporting agriculture. This fund could then be used to raise the purchase price of non-staples. As TVEs develop, their ability to use industry to subsidize agriculture will also strengthen from year to year, the purchase price of non-staples will also gradually increase, and farmers will then feel that farming is worthwhile. At the same time, we can use tax policy to adjust the relative benefits of operating TVEs and producing non-staples. Setting up a fund to subsidize non-staple prices might be better than the current form of subsidies. The TVE money that should be used to subsidize agriculture and non-staples often isn’t all used for this purpose, and it might be wasted.
My asking you to study this issue doesn’t mean that we will definitely add to the burdens of the TVEs, because they in fact are already subsidizing agriculture and non-staples. What we want to do now is to find a way to systematize and institutionalize the use of this money. Such a measure cannot be rushed: we have to act cautiously, because rural areas must be kept stable.
Steps in Aid of Rural Areas
The first step should be a study, which the county Party secretaries, county heads, and leading cadres of the county Party Committee and governments should all review, to determine how to further refine the system of using industries to subsidize agriculture. In the second step, relevant units of the city government will also do joint studies and draw up a plan based on the county studies. Once the plan is ready, the third step will be to conduct successful pilot programs in a few counties or townships. If we feel that this can definitely motivate farmers to plant grain, grow vegetables, and raise pigs, we will then fully expand the scope of the plan. The city’s Finance Bureau also has a tentative idea: that we first centralize half of the extra tax levied on extrabudgetary TVE money at the county level and use it to establish funds for subsidizing the purchase price of non-staples. Or we might take one-third of the original pretax expenditures for agricultural subsidies and use these exclusively for raising the purchase price of non-staples. We offer these ideas for your consideration.
On an inspection tour of the Jiading County trading center for agricultural and sideline products, Shanghai, March 3, 1990.
All industry and sectors must give a green light to supporting agriculture. Since agriculture doesn’t account for a large proportion of Shanghai’s economy, giving a little special consideration to the rural counties won’t greatly affect the city as a whole. If only all industries and sectors will serve the rural areas in the spirit of giving them a green light, Shanghai’s agriculture will be able to develop even better this year.
Currently the villages are facing many problems that need to be resolved.
Coal and Power. Chongming County needs 1,700 tons of coal daily for power generation, but we only give it 1,000 tons. Because Chongming County generates its own power, can the Municipal Economic Commission and the Bureau of Electricity consider providing a bit more coal? This would seem to be very difficult, but leaders of the Economic Commission have already agreed and asked Chongming County to send people to discuss this with them directly.
Capital. The Agricultural Bank operates on a basis of “more deposits and more loans.” The key lies in having more deposits, but to have more deposits, we must make a great effort to organize savings. Is it possible to allocate somewhat more of the goods like color TVs that are in short supply to the Agricultural Bank? That would allow them to use every conceivable means to organize prizes for savings and attract deposits from the farmers. Also, to meet the urgent capital needs of certain large projects in rural areas and industrial projects with good economic returns, I am asking the city’s capital coordination team and the various banks to offer some support—this can’t be solved by relying on the Agricultural Bank alone.
Transportation. First, if counties encounter problems with transportation for animal feed and coal that they have procured on their own, they can ask the city’s Transportation Office for assistance. As long as the goods arrive at a port, we can send ships to help with transportation. Second, in the case of villages that have requested some cars, leaders of the city’s Economic Commission point out that they gave 350 cars to the rural areas last year. If you want more, you can still go to the Economic Commission, provided you have the money. We still have some Mitsubishis and trucks in inventory. Third, we’ve already talked over the question of urban area travel permits with the Municipal Public Security Bureau, and we should give priority to farmers who are bringing fresh vegetables into the city. Apart from vegetable shipments, we can also consider giving some travel permits for shipments of other non-staples into the city. The procedure is to first apply at the county’s transportation team, then the Municipal Public Security Bureau will issue travel permits after review.
Agricultural Mechanization. People have offered many comments about this issue. I told the director of the city’s Bureau of Agricultural Machinery, your present work is very onerous as you have to manage the TVEs in all the rural areas. However, the task is so great that it’s hard to manage them well. You ask for money, but there’s no money; you ask for materials, but there are no materials. Yet the Bureau of Agricultural Machinery cannot shirk its duty to develop agricultural mechanization and to manage this well. I’m therefore asking the bureau to draw up a plan to develop agricultural mechanization in the rural areas. Then Ni Hongfu3 and I will listen to their report together and discuss it with them. The mechanization of agriculture is actually the modernization of agriculture. Shanghai’s agriculture must be modernized, which is why we must focus hard on its mechanization.
Exclusive Franchise Stores for Agricultural Necessities.4 I hear that there’s a phosphate fertilizer factory in Fengxian County whose warehouses were full, yet the city’s agricultural necessities company still refused to let them find ways to sell the fertilizer on their own. As a result, the factory had to halt production. I’m asking the leaders of the agricultural necessities company to go there and look around to determine the exact problems. The franchising of agricultural necessities is a big problem: if handled well, franchises can ensure agricultural growth this year; if not, they will turn into monopolies and will do no good. I’m asking the agricultural necessities company to be sure to handle this issue properly. The city’s Planning Commission and Office of Finance and Trade should also study the issue, examining how to enable farmers to truly benefit and how to link the allocation of agricultural necessities to deliveries and sales of non-staples. This is extremely detailed work. We now have franchising, but we must do timely reviews of the results of its implementation, and timely studies if we pinpoint problems. Zhuang Xiaotian, Ni Hongfu, and I want to hear a special report on this.
Planning. What I find frightening right now is how haphazardly buildings are being put up in many villages. There is no unified planning, and they have taken up quite a lot of arable land. I understand that Shanghai has suffered a net loss of 400,000 mu5 of farmland over the past 10 years. It would be awful if we were to go on like this—we wouldn’t have anything to eat. I hope the planning and land management departments, the county heads, and the village heads will take control of the land, strictly limit the misuse of arable land, keep some for future generations, and keep some to feed us. Everyone should be thinking this way.
Vegetable plots in particular are as precious as gold and must not be casually put to other uses under any circumstances. If they must be taken for other uses, you should pay 3, 5, or even 10 times the price to buy the land; then take this money to outlying areas to start new vegetable plots. Without such a guarantee, our “vegetable basket” project will be threatened. In short, I’m asking you to constrain the homebuilding of farmers and have the buildings more standardized and more closely bunched.
As for developing Pudong, we should first plan well and then solve the problem of cross-river transportation. Without a few tunnels and a few bridges, how can Pudong be developed? The city’s Planning Bureau must inform the county heads about the plans for developing Pudong and ask them to exercise their own controls. We must take future development into consideration now and not build haphazardly. The city’s Planning Bureau should study this further and propose several suggestions.
In giving the green light to supporting agriculture, all industries and sectors should first understand the needs of the rural areas. I hope the leaders of all bureau-level departments will set up a system that calls for regular trips to the countryside every month, every fortnight, or every week. Since starting work in Shanghai, I’ve visited all 10 counties, and I will continue to visit them in the future. I hope the leaders of all bureau-level departments will do likewise. Go there and learn about the needs of the rural areas and then decide how your department can give a green light to supporting agriculture. I also hope those at the city’s Academy of Agricultural Sciences will visit the villages frequently, work closely with our county and village heads, and come up with more results in agricultural science.
1. This is the main part of Zhu Rongji’s speech at the closing ceremony of a Shanghai conference on rural work.
2. Zhuang Xiaotian was then a vice mayor of Shanghai.
3. Ni Hongfu was then also head of Shanghai’s leading group for agricultural mechanization.
4. Translator’s note: agricultural necessities franchise stores were specialized companies or agencies authorized by the state to sell materials such as fertilizers, herbicides, pesticides, plastic sheeting, and so on that were needed for agricultural production.
5. One mu is equal to 666.7 square meters.