Rus in urbe

IN DAYI COUNTY, a couple of hours' drive down a motorway from the city of Chengdu, the capital of Sichuan Province, Chinese tourists stroll through the meandering courtyards of a rural mansion. In the 1950s, soon after Mao seized power, the mansion was turned into a museum, intended as a showcase of evil. It once belonged to Liu Wencai, a landowner supposedly notorious for ill-treating his tenant farmers. Liu embodied a class despised by Mao, who came to power on the back of a promise to give land back to the peasants.

In its Maoist heyday the museum was a place of pilgrimage. Red Guards swarmed there for ritual denunciations of Liu and his ilk. A high point of their visit was a trip to the “water dungeon”, a room with several inches of water covering the floor where Liu had allegedly kept disobedient farmers. Another was a series of life-size sculptures of peasants and their vicious oppressors. A politically disfavoured curator from Beijing's Forbidden City who happened to look like Liu was forced to stand next to the sculptures as a “living Liu Wencai” so that visitors could shout and (though not strictly permitted) spit at him, according to Geremie Barmé of Australian National University.

The sculptures are still there, but in recent years a wave of revisionism has been sweeping across Dayi. Local officials were already having second thoughts by the early 1980s. But it was a book reassessing Liu's life published by an outspoken journalist in 1999 that finally convinced many that the man was really not that bad. His water dungeon was a government fabrication, the museum now points out. He spent a lot of money on local schools and paid for a road to be built from Chengdu to Dayi. Last year a grandson organised a get-together in Dayi for the extended Liu clan, whose members would once have been terrified of revealing their ties. More than 1,000 turned up.

The slaughter of many thousands of landlords (not including Liu, who died of natural causes) by officials and vengeful peasants shortly after the communist takeover resulted in profound changes in the system of rural land ownership. Peasants got the land Mao promised them, but only briefly. In the late 1950s the party took it back again and forced farmers into collectively owned “people's communes”. The legacy of that disastrous decision, which contributed to a famine that left tens of millions dead, still weighs heavily on rural China. So too does a decision to confer hereditary status on peasants, who would be all but barred from cities to stop them rushing in to find work.

The curse of the hukou

The hukou system, as this one-time apartheid is commonly known, applied to urban as well as rural dwellers, but peasants got a worse deal because they received hardly any welfare benefits, and job prospects in the countryside were dismal. The system has been much eroded since the Mao era because of the need for cheap labour to fuel China's manufacturing boom. But its lingering impact, combined with the still collective ownership of rural land, will retard China's urbanisation in the years ahead just when the country is most in need of its consumption-boosting benefits. Two researchers from China's finance ministry, Chen Xiaoqiang and Liu Ling, wrote in March that it was time to start returning land to the peasants, both to spur consumption and to help defuse growing rural unrest. Most officials dare not say this so bluntly, but they admit that change is needed.

In 2007 Chengdu, and Chongqing to its south-east, were given licence to experiment. The principle of collective ownership could not be changed, but farmers' rights could be clarified and rural land markets of sorts could be established. In Chengdu, which is responsible for a large rural area including Dayi county, officials spoke of initiating a “new land reform” (hinting at similarities to the great land reform that divvied up the estate of landlord Liu). They began a drive to ensure that farmers at last got long-promised certificates showing the exact boundaries of their fields and housing as well as confirming their rights to use them (farmland is subject to a 30-year renewable contract).

Without such documents a market could not take off. Regulations dating back at least to 1997 have obliged officials to issue them. But Landesa, an American NGO, says a survey it conducted in mid-2010 in 17 provinces, along with Renmin University and Michigan State University, found that only 44% of respondents had a complete set of certificates. One in three had no documents at all. In April the central government urged the whole country to finish issuing the certificates by the end of 2012. Dayi county, chosen by Chengdu as a trailblazer for land reform, says it got the job done by the middle of last year. But one peasant fumes that officials never bothered to give her any documents and seized her house and farmland a few months ago for a development project. “Liu was a great landlord,” she says. “I wish officials today were like him.”

Both Chengdu and Chongqing have gone a step further. They have set up markets for rural land derivatives, allowing farmers who create new land for agricultural use (by giving up some of their housing plots, for example) to sell the right to use an equivalent amount of rural land for urban development. Thus a developer who wants to build on a greenfield site that has already been approved for urban construction bids first for a “land ticket”, or dipiao, which certifies that such an area of farmland has been created elsewhere. The regulations say farmers get 85% of the proceeds: good news, in theory, for those in remote, dirt-poor areas who would otherwise have no chance of cashing in on the value created by urban expansion.

This is hardly revolutionary. Especially for Chongqing's Mao-loving party chief, Bo Xilai, doing good by the peasantry would seem a canny move. But because the notion of the collective persists, the system is wide open to abuses. Local officials have considerable incentives to force farmers to give up housing land and move to more compact dwellings in order to create land for dipiao trading (some of the proceeds of which also go to village authorities). The dipiao markets in Chongqing and Chengdu have done little more than add a layer of complexity to a widespread trend in many parts of China that has often added to peasants' grievances.

Reform might quickly be exploited by the very forces it is meant to constrain: rapacious local governments and developers

In the name of building a “new socialist countryside” (a slogan launched in 2005), local governments have been corralling farmers into new apartment blocks in order to free up land which they can use for profitable purposes. Officials have justified the practice as a way of reducing incentives for local governments forcibly to appropriate farmland and sell it to developers. Two million peasants a year have lost their land this way in the past five years, a senior government adviser in north-east China said in March. The new strategy often means the farmers are crammed into apartments with no backyards to raise chickens or store tools, and they face a longer journey to their fields.

Though officially sanctioned, the dipiao markets are viewed warily by the central leadership. Late last year Chengdu's market was suddenly closed down. No clear explanation was given, but a Chinese scholar says higher-level officials worried that dipiao were being traded without land having first been converted to agricultural use. The risk, central officials feared, was that it would never happen at all. The market reopened in April, but the central government remains cautious. In Chongqing only 10% of the government's annual sales of undeveloped rural land are subject to the dipiao system.

Thoroughgoing land reform, of the sort that would enable farmers to cash in on the value of their farmland and establish permanent and prosperous lives in cities (and at the same time encourage larger-scale farming), thus remains stuck. One obstacle is ideological: for all their economic pragmatism, many in the party still regard collectivism as a sacred principle. Privatisation remains a dirty word. A more practical worry is that reform might quickly be exploited by the very forces it is meant to constrain: rapacious local governments and developers. These, it is feared, would take advantage of any changes to persuade farmers unaware of land values to sell their holdings at less than market rates. The numbers of poor, landless peasants would soar, creating huge instability.

Reformers in Beijing argue that most farmers are far cannier than officials suspect. But the global financial crisis has strengthened the case for caution in the minds of party leaders. As many as 20m workers returned to the countryside when the crisis broke in 2008 and China's exports slumped. Having farmland to go back to, many officials believe, kept the unemployed migrants from taking to the streets. As officials often say in China, “stability trumps everything.”

Prospects for reform of the hukou system are only slightly better. Both Chengdu and Chongqing have been experimenting with this. They have declared that holders of rural hukou in the countryside surrounding these cities can move into urban areas and enjoy the same welfare benefits as their urban counterparts without giving up their land entitlements. This was an important step. Though the hukou divide is widely resented, peasants have often been reluctant to give up their rural status for fear of losing their land, as well as the added benefit in the countryside of being able to have two children rather than one. In effect, Chongqing and Chengdu have created a new class of urban residents who enjoy the best of both worlds. But grand plans for hukou reform have fallen by the wayside before as officials tot up the price. The cities of Guangzhou and Zhengzhou abandoned reform efforts several years ago because of worries about the cost.

Chongqing's plans are ambitious. Local officials estimate the cost of converting 3m people at around 200 billion yuan ($30 billion). But the municipality says it wants to double the number of urban hukou holders by turning 10m of its rural citizens (some of whom already live in urban areas) into card-carrying urbanites over the next ten years. It has made a rapid start. Since it relaxed its policy in August last year it has given urban hukou to more than 1.7m people. There are conditions: they must have been working in urban areas for at least three years, or for five years if they want to transfer their hukou to the centre of Chongqing.

The reform remains only partial. The benefits of being a Chongqing urbanite still cannot be transferred to any other part of the country. And if implementing such measures nationwide means raising more taxes, urbanites will dig in their heels. Local governments “don't really have the incentives and they don't have the resources” to encourage greater integration of migrants into urban life, says the World Bank's Mr Kuijs.

Although Chinese officials define the population as being already nearly 50% urban, the number of urban hukou holders is only around 35%. Zhang Zheng of Peking University says many of those who have moved to urban areas in recent years are wrongly seen as permanent migrants. Having reached their 30s or 40s, when they can no longer do mind-numbing, fast-paced and finicky work on production lines, they will often go back to the countryside. Late last year the National Bureau of Statistics asked rural hukou holders in the north-eastern province of Jilin whether they wanted to switch to urban status. “The results were surprising,” one of the bureau's researchers wrote. The majority said no, and most young people who had moved to urban areas said they wanted to go back to the countryside when they got older.

For the past two decades or more, urbanisation in China has come relatively easily. As the country proudly claims, slums and shantytowns are rare compared with other developing countries. But ensuring a continuing net inflow of migrants into the cities as the youngest cohort shrinks will mean giving workers from the countryside more incentives to stay permanently (such as affordable housing and schooling). More money is being spent on these, but not yet enough. Too much responsibility is devolved to local governments that usually try hard to shirk it.

Cities say they welcome migrants, but some find roundabout ways of keeping them from settling. Beijing recently launched a set of extraordinary measures to tame property prices and ease traffic congestion that included all but banning migrants (one-third of the city's population) from buying homes or cars. In the name of improving safety, it has started closing down basement dwellings where migrants (known as the rat tribe) often live. China says it wants urbanisation, and it certainly needs it. But even as some obstacles are removed, new ones spring up.