A stand-off between around 20,000 protesters and more than 1,500 police and paramilitary forces in China's Hunan province has ended in bloodshed, with scores of people injured and a middle-school student beaten to death by the police, according to eye-witness reports. The incident not only highlights China's persistent problems with rural unrest, but also underscores the rationale for the central government's preoccupation with social stability and improving rural livelihoods.

China's government continues to make some effort to address the root causes of rural discontent. Most recently, it has announced increases in spending on rural healthcare and education, as well as plans to expand the rural social insurance and welfare systems. However, significant challenges remain. Central government spending on rural development continues to fall short, with local governments expected to provide most of the funds for public services in the countryside. Also, the actual implementation of policies promulgated in Beijing depends crucially on the co-operation of local governments, which are often complicit in the land seizures and corruption that fuel rural protests.

Abuse of power

The protest in Hunan was apparently sparked by a sudden doubling of public-bus fares during the Chinese Lunar New Year holiday, when many people travel to visit their families. In the resulting clashes, several police vehicles and public buses were torched, at least one person was reportedly killed and many protesters were arrested.

The protest is the most recent manifestation of widespread discontent in the Chinese countryside, which is being fuelled by poverty, inequality, corruption, rising healthcare costs and illegal land requisition. According to one official source, there were around 23,000 "mass incidents" in 2006, down from 26,000 in 2005. This implies that some progress is being made, although the reliability of these figures and the definition of what constitutes such an incident remains open to doubt (other official sources put the number of mass incidents in 2005 at 87,000). As in previous cases, the ostensible reason for the Hunan protest seems disproportionate to the scale and violence of the incident, pointing to deeper discontent that was only waiting for a trigger to manifest in major unrest. (Local officials have reportedly acknowledged that the protest was an expression of underlying resentment against corruption.)

Good intentions

China's top leaders, some of whom have served in China's less-developed western provinces, continue to push reforms aimed at addressing the root causes of rural social unrest. In early March the ministry of finance announced that central government spending on healthcare would rise by 90%, while education spending would rise by 40%. At the current session of the National People's Congress (NPC), China's top legislative body, in Beijing, the central government announced it would spend Rmb392bn (US$50.6bn) on rural development, an increase of Rmb52bn over 2006 and of Rmb94bn over 2005.

The central government funds will be used to expand China's social-welfare system, which aims to establish a minimum living allowance for the rural poor, and the rural co-operative medical system. To reduce discontent produced by lay-offs from state-owned enterprises, the government also plans reforms to its unemployment insurance and work-related injury compensation schemes. Land-use conversion regulations have also been tightened in an effort to reduce unrest provoked by unfair seizures of land. For example, local governments must now record land sales as "on-budget" income, and certain types of projects--such as golf courses and theme parks--have been banned on undeveloped land. Enforcement efforts have been strengthened by sending out teams of auditors to review land rezoning arrangements by local governments. The NPC will also pass a new private property law which, while stopping short of reforming the rural land-tenure system, reiterates the legal requirement to compensate farmers adequately for the expropriation of their land.

Implementation challenges

Although the government appears to be serious about tackling rural problems, its efforts face many obstacles. First, despite being increased to Rmb392bn in 2007, central government spending on rural development remains woefully insufficient. Given that local governments continue to be expected to shoulder most of the burden of rural healthcare and education, the impact of the recently announced increases is likely to be disappointing. The central government's spending on rural welfare continues to pale in comparison to allocations for urban workers. (In 2006 allocations for rural living allowances for China's rural population of 600m totalled Rmb4.2bn; the budget for the minimum living support insurance, which is issued to the estimated 22.3m urban poor, was a much more substantial Rmb13.6bn.)

Another significant obstacle is that the central government in Beijing relies to a large extent on local governments to implement its policies. In many instances, however, local governments are the perpetrators of--or at least complicit in--the abuses suffered by the rural population. This is particularly true with respect to the unfair expropriation of farmers' land for urban and industrial development. Cash-starved local governments have a strong incentive to seize farmers' land, reclassify it as urban, and lease it to developers at a massive profit. Profits from land-conveyance fees paid by developers and investors for long-term rights to use the land have become an increasingly crucial source of local government revenue, without which, ironically, they could provide even fewer public services.

Even where funding is adequate and the local government is co-operative, many national-level programmes are in an early stage of development and require a challenging degree of co-ordination between various levels of government. China's unemployment insurance system, which has no system for individual accounts, is a good example. Participation has been patchy and protection for migrant workers continues to be particularly poor. Out of an estimated 120m such workers, fewer than 450,000 have received unemployment allowances, with many employers avoiding contribution payments.

Despite these obstacles, government efforts to improve rural livelihoods may be aided by ongoing structural changes in the economy, such as rising food prices and labour costs in urban areas. Falling food prices over the past 15 years have been a crucial reason for rising rural-urban inequality, as Chinese farmers' incomes have stagnated relative to those in the country's booming urban areas. However, food prices--and hence rural incomes--appear to be on the rise as a result of the falling supply of arable land, increased demand for agricultural products and a shift away from grain production to higher-value-added crops. Rising wages in China's coastal factories will also boost remittances by migrant workers to rural areas.

Harmonious countryside?

Ultimately, inadequate support for basic public services in rural areas may constrain economic growth in rural areas, limiting the government's efforts to reduce poverty and create a "harmonious countryside". Access to basic healthcare and other public services in many areas now requires the ability to make an up-front payment, providing a powerful incentive for China's 600m rural dwellers to save any surplus income rather than to spend it or to make productivity-enhancing investments in their farms or enterprises. As a result, the failure of the government to channel sufficient resources to the countryside could slow rural development, making it more difficult to deal with the social and economic problems associated with rural-urban inequality and rapid urbanisation.

In political terms, however, expressions of rural discontent such as the riots in Hunan appear to pose little direct threat to the central government. Many such protests appear to be spontaneous, and the government typically moves quickly to arrest the organisers and to placate everyone else. In addition, few aggrieved rural citizens seem to hold the government in Beijing primarily responsible for the incompetence or abuses of local officials. One sign of this is the constant stream of rural petitioners arriving in Beijing with the hope that the central government, much like the emperor in feudal times, will assist them if informed of their plight.